5. The owner of Instant Printing, a firm that prints business cards, tells you that as a resultof an increase in the wage rate of printer operators he bas reduced the amount of outputhe produces and the amount of capital he uses. How would you respond to this?
(A) You should tell him that this doesn't make any economic sense because according to thefactor substitution effect he should have substituted toward capital and away from labor.
(B) You should tell him that instead of reducing output and the demand for all factorsof production, he should increase output and the demand for all factors ofproduction so that he can meet the higher labor costs by generating morerevenue.
(C) You tell him that capital must be an inferior input, because he reduced his use ofcapital when the price of labor increased.
(D) This scems logical, because the output effect of a factor price increas& wouldcause a firm to demand less of all inputs, not just the input whose price increased.