f the price of capital decreases and the demand for labour decreases then Select one: DA. the scale effect is less than the substitution effect. OB. the scale effect and substitution effect offset each other. the scale effect is greater than the substitution effect. O D. capital and labour are gross complements.

f the price of capital decreases and the demand for labour decreases then Select one: DA. the scale effect is less than the substitution effect. OB. the scale effect and substitution effect offset each other. the scale effect is greater than the substitution effect. O D. capital and labour are gross complements.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 2QCMC

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69. If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, it can be concluded that: A. The substitution effect is greater than the output effectB. The output effect is greater than the substitution effectC. The income effect is greater than the output effectD. Labor cannot be easily substituted for capital
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Suppose a huge scientific breakthrough doubles the output that an additional houra huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produceof U.S. labor can produce. As a result, there is ______ in the U.S. production function. A. an upward shiftan upward shift B. no shiftno shift C. a downward shifta downward shift There is ______ in the U.S. demand for labor and ______ in the U.S. supply of labor. A. a decreasea decrease; a decreasea decrease B. an increasean increase; a decreasea decrease C. no changeno change; an increasean increase D. an increasean increase; no changeno change
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Q. 1 Analyze and graph the Product Effect and the Substitution Effect in labor demand in the face of an increase in labor price.
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