When a Firm Substitutes Away from a Factor Whose Price

question 110

Multiple Choice

When a firm substitutes away from a factor whose price has risen and toward a factor whose price has fallen, it is an example of the

• A) output effect of a factor price decrease.
• B) factor substitution effect.
• C) factor complementary effect.
• D) output substitution effect.

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Definitions:

Straightforward Manipulation

The process of altering an independent variable in a simple and clear manner to observe its effect on the dependent variable.

External Validity

The degree to which the results of an experiment may be generalized.

Strong Manipulation

The application of a significant change or intervention in an experiment, aiming to produce a noticeable effect on the dependent variable.

Internal Validity

The certainty with which results of an experiment can be attributed to the manipulation of the independent variable rather than to some other, confounding variable.