Suppose a Firm Uses Three Inputs in Production,capital,labor,and Land

question 29

Multiple Choice

Suppose a firm uses three inputs in production,capital,labor,and land.If the price of labor increases,the firm adjusts by decreasing the amount of labor used,increasing the amount of capital used and decreasing the amount of land used.What does this imply about the relationship between the three inputs?

• A) Land and labor are net substitutes while labor and capital are net complements.
• B) Land and labor are net complements while labor and capital are net substitutes.
• C) Land and labor are gross substitutes while labor and capital are gross complements.
• D) Land and labor are gross complements while labor and capital are gross substitutes.
• E) none of the above

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Definitions:

Coercive Power

A form of authority based on the ability to deliver sanctions or punishments to those who do not comply with demands or expectations.

Channel

In marketing, the method or route through which a product or service is delivered to customers, including direct and indirect ways.

Break-even Analysis

A calculation to determine the point at which revenue received equals the costs associated with receiving the revenue, indicating no net loss or gain.

Cost-plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's unit cost.