The Principle of Substitution Plays a Central Role in Resource

question 48

Multiple Choice

The principle of substitution plays a central role in resource allocation because it demonstrates that

• A)firms will find it profitable to make abundant use of relatively scarce factors.
• B)methods of producing the same commodity will not differ from one country to another.
• C)firms can use all factors of production interchangeably with no impact on their costs.
• D)prices will be relatively low for those factors for which demand is high relative to supply.
• E)relative factor prices reflect relative scarcities of factors in the economy and so firms will find it profitable to make abundant use of relatively abundant factors.

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Definitions:

Sugar

A sweet-tasting, soluble carbohydrate used as a sweetener in food and drink.

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The process by which snow changes into water due to rising temperatures.

True Premises

Statements or propositions that are accepted as true and serve as the foundational arguments in deductive reasoning.

Logical Relation

A connection or association between concepts or objects that is governed by the principles of logic, indicating how one can influence or relate to another.