Suppose Capital and Labor Are Perfect Substitutes for a Particular

question 48

Multiple Choice

Suppose capital and labor are perfect substitutes for a particular production process. If the price of labor increases, holding the price of capital and the level of output constant, the firm may:

• A)use more capital and less labor.
• B)use more labor and less capital.
• C)use the same amounts of capital and labor.
• D)Either use more capital and less labor or use the same amounts of both inputs.

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Definitions:

Franchise Arrangement

A legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business.

Wind Up

Wind Up is the process of concluding the affairs of a business or partnership, including paying off debts and distributing remaining assets to stakeholders.

Termination Notice

A formal declaration, either oral or written, that signifies the end of an agreement or employment.

Day-to-Day Operations

These are the routine activities that a business or organization conducts on a regular basis to ensure its smooth and ongoing functioning.