If the price of an input falls,a firm would increase the use of that input for two reasons:
A)the input is now more productive,and the firm can substitute this input for other relatively more expensive inputs.
B)the input is now more productive,and overall production costs are now lower,meaning a firm may choose to increase production.
C)overall production costs are now lower and the firm can substitute this input for other relatively more expensive inputs.
D)overall production costs are now lower and the firm will have more of other inputs to use with the one in question.

Question

Quizplus · Accepted Answer

When the price of an input falls, it does not necessarily mean the input is more productive, but it does mean that overall production costs are lower. This allows a firm to substitute this cheaper input for other relatively more expensive inputs, optimizing production costs.

If the Price of an Input Falls,a Firm Would Increase