Answered: The substitution effect of a change in…

The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant EC68 O the greater the change in output. O the flatter are the firm's isoquants.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Labor Force Participation Rate analysis

The labor force participation rate analysis calculates the percentage of the working-age population either employed or actively seeking work. It can be anyone in the age category of 16 to 64, on the condition that they are not institutionalized. A high labor force participation rate shows that more people are employed and contributing their wages to the economy, making it a healthy economy. It also shows that there are more people actively looking for employment leading to more hiring options for employers. On the other hand, a low labor force participation rate shows a low number of people employed or looking for work. This leads to an economic setback with fewer wages going into the economy. In such a scenario, employers might have to cut back on profits, lay off employees, or stop the process of hiring.

Question

The substitution effect of a change in wage rate on a firm's
demand for labor input will be more significant
EC68
O the greater the change in output.
O the flatter are the firm's isoquants.
O the larger the quantity of labor employed.
O the more sharply curved are the firm's isoquants.

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Step 1: Define isoquants

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