If a Large Decrease in Rent Leads to a Firm

question 111

Multiple Choice

If a large decrease in rent leads to a firm cutting back on the labor it uses,

• A)the output effect outweighs the substitution effect.
• B)the substitution effect outweighs the output effect.
• C)the substitution and output effects are equal.
• D)there is no way of determining the relative strengths of the output and substitution effects.

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Definitions:

Product Innovation

The development and sale of a new or improved product (or service).

Entrepreneurs

Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.

Innovators

Innovators are individuals or organizations that introduce new ideas, methods, or products, often leading the way in technological and societal changes.

Entrepreneurs

Individuals who take the risk of starting and managing businesses with the aim of making profits or driving social change.