Substitution effect; substitution effect. a. 25 b. 2.5 c. 0.4 d. 4.0 12. If the

Question

Substitution effect; substitution effect.

a. 25

b. 2.5

c. 0.4

d. 4.0

12.   If the price of machinery rises and a firm replaces some machines with workers, this is the __________. If the price of machinery rises and as a result, the level of production falls (output produced falls) and in turn, the firm hires less workers, this is an example of the ________. A.   Substitution effect; output effect. B.   Output effect; output effect. C.   Output effect; substitution effect. D.  

Substitution effect; substitution effect.

Explanation / Answer

12. A. Substitution effect; output effect.

13. b. 2.5

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