An Increase in the Price of a Particular Factor Will

question 41

Multiple Choice

An increase in the price of a particular factor will:

• A)usually result in the substitution of other factors for this factor, and hence will cause quantity of this factor demanded to fall.
• B)have no effect on the amount of it being used, according to the principle of least-cost, which requires only the MP of each factor be proportional to its price, not equal to it.
• C)not result in diminished use of this factor if output is not decreased at the same time.
• D)result in less employment only if firms have monopoly power in product markets.
• E)cause the marginal revenue product curve for this factor to shift downward.

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Definitions:

Compasses

Instruments used for navigation and orientation that show direction relative to the geographic cardinal directions.

Muffins

A small, baked item that is typically sweet, made from batter or dough.

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Exchange

The act of trading goods, services, or currencies between parties, either directly or through a medium of exchange like money.