the scale effect is a the change in output due to a change i

the scale effect is

(a) the change in output due to a change in the wage rate

(b) the change in labor demand due to a change in the size of the firm\'s capital stock

(c) the change in labor demand due to the substitution of capital for labor in response to a wage change

(d) the change in labor demand due to a change in the level of output resulting from a wage increase or decrease

Solution

The scale effect indicates what happens to the demand for the firm\'s inputs as the firm expands production. As long as capital and labor are \"normal inputs,\" the scale effect increases both the firm\'s employment and capital stock.

So the answer will be option B