If Two Resources Are Highly Substitutable for One Another

question 43

Multiple Choice

If two resources are highly substitutable for one another,

• A)a decrease in the price of one will increase unit costs of production.
• B)an increase in the price of one will increase the demand for the other.
• C)an increase in the price of one will reduce the demand for the other.
• D)a decrease in the price of one will increase the demand for the other.

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Definitions:

Domestic Producers

Companies or individuals that manufacture or produce goods and services within their home country, as opposed to importing them from abroad.

Tariffs and Quotas

These are trade policies where tariffs are taxes on imported goods, and quotas are limits on the amount of a good that can be imported.

Import Substitution

An economic policy aimed at replacing foreign imports with domestic production to promote local industries.

Foreign Competition

Competition that domestic companies face from companies located in other countries, influencing markets, pricing, and innovation.