The notion that when the price of an input falls, a firm\'s marginal cost curve

Question

The notion that when the price of an input falls, a firm's marginal cost curve shifts down and overall production increases so that more of every input is employed is known as a. The output effect. b. The substitution effect. c. The input effect. d. The cost effect. The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except a. What percentage of total costs are made up of labor costs. b. How much quantity demanded in the output market will be reduced by a higher price. c. The capital to labor ratio before the wage increase. d. How easily other inputs can be substituted for labor. Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero. Then the wage elasticity of demand for labor by widget makers will be a. +1. b. -1. c. 0. d. Infinite.

Explanation / Answer

As the price elasticity of demand is 0,,which means demand for widgets is inelastic. So, the Quantity of widgets produced by firm is almost fixed , and proportion of labour and capital is also fixed. So, the Demand for labour will also be inelastic as labour is required in fixed prportion.

So, the wage elasticity of Demand will also be 0.

If you don't understand anything then comment, I'ill revert back on the same. :)

If you don't understand anything then ccomment, I'ill revert back on the same. :)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.