Consider a Firm That Uses Two Inputs, Labour and Capital

question 225

Multiple Choice

Consider a firm that uses two inputs, labour and capital, to produce its output.Assume labour is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

• A)The law of diminishing returns: For a given decline in capital, decreasing amounts of labour are required to produce the same level of output.
• B)The law of increasing marginal opportunity cost: If a firm uses less and less capital it must use more and more labour, which drives up the cost of labour.
• C)The law of diminishing returns: For a given decline in capital, increasing amounts of labour are required to produce the same level of output.
• D)The law of imperfect substitutability: Labour and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labour.

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Definitions:

Subliminal Persuasion

A technique aiming to influence people's thoughts, feelings, or actions through stimuli that are below the threshold of conscious awareness.

Self-Esteem

One’s feelings of high or low self-worth.

Memory-Enhancement

Techniques or strategies intended to improve or augment one's ability to remember information.

Subliminal Priming

A psychological phenomenon where stimuli are presented below the threshold of conscious perception to influence thoughts, feelings, or actions.