If an Increase in the Cost of Labor Causes the Firm

question 41

Multiple Choice

If an increase in the cost of labor causes the firm to use less capital,then

• A) the scale effect has dominated over the substitution effect.
• B) the substitution effect has dominated over the scale effect.
• C) the firm has moved along an isoquant curve.
• D) the firm has moved onto a higher isoquant.

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