Which of the following statements is false?
A) Perfect substitutes are associated with linear isoquants.
B) Perfect complements are associated with right-angled isoquants.
C) The elasticity of substitution can be positive or negative.
D) The more two factors are substitutes in the firm's production function, the greater is the elasticity of substitution.
E) Perfect substitutes do not need to be employed in a one-to-one ratio by the firm.

Question

Quizplus · Accepted Answer

The elasticity of substitution between two inputs in production is always non-negative, indicating how easily one input can be substituted for another. It cannot be negative, as a negative value would imply that inputs become less substitutable as their relative prices change, which contradicts the concept of substitution elasticity.

Which of the Following Statements Is False