The input-substitution effect of an increase in the wage comes about because higher wages:
A. increase production costs, and final good prices will rise, reducing the quantity demanded of the product.
B. increase production costs, and final good prices will rise, increasing the quantity demanded of the product.
C. make labor less expensive as an input, leading firms to switch to labor as an input.
D. make labor more expensive as an input, leading firms to switch to other inputs.
Answer: D
Economics
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