If Two Inputs Are Substitutes in Production,and an Increase in the Price

question 6

Multiple Choice

If two inputs are substitutes in production,and an increase in the price of one input shifts the demand curve for the other input to the left,then

• A) the scale effect is greater than the substitution effect, and the two are gross complements.
• B) the scale effect is less than the substitution effect, and the two are gross complements.
• C) the scale effect is greater than the substitution effect, and the two are gross substitutes.
• D) the scale effect is less than the substitution effect, and the two are gross substitutes.

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Definitions:

Put Contract

A put contract is a financial agreement giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time frame.

Premium

The amount by which the price of a bond or security exceeds its face value or the cost associated with an options contract.

MBI Stock

Likely refers to the stock of a specific company identified by the acronym MBI, requiring specific context to accurately define financial or market attributes.

Call Option

A fiscal arrangement offering the buyer the freedom, yet not the compulsion, to buy various assets like stocks, bonds, or commodities at a fixed price before the expiration of a certain period.