If the Price of Labor Falls Relative to the Price

question 156

Multiple Choice

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that

• A)the substitution effect is greater than the output effect.
• B)the output effect is greater than the substitution effect.
• C)the income effect is greater than the output effect.
• D)labor cannot be easily substituted for capital.

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Definitions:

Organizational Change

The method by which a business or institution modifies its framework, tactics, practices, technologies, or corporate culture.

Design Competitions

Contests or challenges where individuals or groups submit designs in response to a set of criteria or themes, often with the aim of selecting the best.

Crowdsourcing

Outsourcing aspects of a decision process to a large collection of people.

Open Innovation

An approach to innovation that stresses the importance of collaboration with external partners and the exchange of knowledge to spur creativity and new developments.