If the Price of an Input Falls,a Firm Would Increase

question 11

Multiple Choice

If the price of an input falls,a firm would increase the use of that input for two reasons:

• A)The input is now more productive,and the firm can substitute this input for other relatively more expensive inputs.
• B)The input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production.
• C)Overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs.
• D)Overall production costs are now lower and the firm will have more of other inputs to use with the one in question.

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Definitions:

Output

The quantity of goods or services produced in a given period by a firm, industry, or country.

Multiplier Size

A measure of the impact of fiscal and monetary policies on the national income, showing how initial spending leads to increased total spending.

Fiscal Policy

Government policies regarding taxation and spending that are used to influence economic conditions, including stimulating or restraining economic growth.

Potential GDP

The highest level of Gross Domestic Product (GDP) an economy can sustain over a long period without increasing inflation, reflecting its full employment output.