A firm practices input substitution when it
A)retrains Joe the welder as a painter and Pat the painter as a welder.
B)buys extra machines for its workers to use.
C)allows fixed cost to become variable.
D)replaces unskilled labor with automated machinery.

Question

Quizplus · Accepted Answer

Input substitution involves the substitution of one input for another to achieve cost savings or to improve efficiency. Replacing unskilled labor with automated machinery is an example of input substitution because the machinery substitutes for the labor input. Choices A and B involve retraining or adding more inputs, respectively, rather than substituting inputs. Choice C refers to a different concept of cost structure, where fixed costs become proportionately smaller as production increases, but the nature of the inputs used doesn't change.

A Firm Practices Input Substitution When It