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6. Consider the truthfulness of the following statements. I. II. The lower is the elasticity of substitution between capital and labor, the more inelastic labor demand will be. Suppose capital and labor are perfect substitute inputs for a particular firm. If the price of labor increases, holding the price of capital and the level of output constant, the firm will necessarily lower its costs by substituting towards capital and away from labor. a. Only statement I is true. b. Only statement II is true. c. Both statements I and II are true. d. Neither statement is true.

6. Consider the truthfulness of the following statements. I. II. The lower is the elasticity of substitution between capital and labor, the more inelastic labor demand will be. Suppose capital and labor are perfect substitute inputs for a particular firm. If the price of labor increases, holding the price of capital and the level of output constant, the firm will necessarily lower its costs by substituting towards capital and away from labor. a. Only statement I is true. b. Only statement II is true. c. Both statements I and II are true. d. Neither statement is true.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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6. Consider the truthfulness of the following statements. I. II. The lower is the elasticity of substitution between capital and labor, the more inelastic labor demand will be. Suppose capital and labor are perfect substitute inputs for a particular firm. If the price of labor increases, holding the price of capital and the level of output constant, the firm will necessarily lower its costs by substituting towards capital and away from labor. a. Only statement I is true. b. Only statement II is true. c. Both statements I and II are true. d. Neither statement is true.
Transcribed Image Text:6. Consider the truthfulness of the following statements. I. II. The lower is the elasticity of substitution between capital and labor, the more inelastic labor demand will be. Suppose capital and labor are perfect substitute inputs for a particular firm. If the price of labor increases, holding the price of capital and the level of output constant, the firm will necessarily lower its costs by substituting towards capital and away from labor. a. Only statement I is true. b. Only statement II is true. c. Both statements I and II are true. d. Neither statement is true.
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