If Capital and Labor Are Gross Substitutes in Production

question 19

Multiple Choice

If capital and labor are gross substitutes in production,

• A) then the scale effect dominates.
• B) then the substitution effect dominates.
• C) then the scale and substitution effects are of equal magnitude.
• D) then capital and labor must be used in a one to one ratio.
• E) then capital and labor cannot be used at the same time

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Definitions:

New Product

A good, service, or idea that has not previously been brought to the market by its seller.

Tying

A sales practice where a seller requires the purchase of a second product or service together with the first.

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A medication that can prevent death in critical health situations.