A Firm Will Employ More of an Input Whose Relative

question 151

Multiple Choice

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the

• A) output effect.
• B) substitution effect.
• C) idea of derived demand.
• D) law of diminishing returns.

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Definitions:

Social Withdrawal

The act of avoiding social situations and interactions, often due to anxiety, depression, or preference.

Hallucinations

Perceptions in a conscious and awake state in the absence of external stimuli which have qualities of real perception.

Coping Abilities

The mechanisms and skills that individuals use to manage stress and difficult situations.

Lack of Interest

A decreased level of engagement or enthusiasm towards activities or life situations that previously held significance.