If Technology Dictates That Labor and Capital Must Be Used

question 128

Multiple Choice

If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use

• A) more labor as a consequence of the substitution effect.
• B) more labor as a consequence of the output effect.
• C) less labor as a consequence of the substitution effect.
• D) less labor as a consequence of the output effect.

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