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Sheila uses labor and capital to produce soccer balls. She finds that as price of capital rises, she hires more workers and cuts back on the use of capital. This behavior is consistent with

August 14th, 2017 admin

 

  1. Labor and capital being complementary goods
  2. The factor substitution effect
  3. The increasing marginal productivity of labor
  4. The dominance of the factor substitution effect over the output effect for capital

 

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