Multiple Choice
If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, then it can be concluded that
A) the substitution effect is greater than the output effect.
B) the output effect is greater than the substitution effect.
C) the income effect is greater than the output effect.
D) labor cannot be easily substituted for capital.
Correct Answer:
Verified
Correct Answer:
Verified
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