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D Question 4 1 pts Suppose capital and labor can be substituted in the production of a good. If the price of labor falls dramatically,
D Question 4 1 pts Suppose capital and labor can be substituted in the production of a good. If the price of labor falls dramatically, say during an economic recession, what can we assume will happen to the quantity of capital used in the production of this good? O The firm will purchase less capital since labor is cheaper. O It depends if the substitution or output effect is stronger. O They'll purchase more capital since total costs have declined. O More labor and capital will be used until costs are equal. D Question 5 1 pts Suppose capital and labor are used in in a complimentary way to produce a good. If the price of capital declines, what can we assume will happen to the quantity of labor used in production? O The price of capital has gone down. The firm will use less of both resources. O More labor and less capital will be used until costs are equal. O Costs have decreased. The firm will produce more and need more of both resources. O It depends if the substitution or output effect is stronger
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