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Question
Which one of the following is NOT a ceteris paribus assumption of the Law of Supply?
Options
Indirect taxes and subsidies on the firm's products remain constant.
Technology used by the firm in production remains constant.
Prices of the factors of production paid by the firm remain constant.
Price of the commodity produced by the firm remains constant.
Solution
Price of the commodity produced by the firm remains constant.
Explanation:
The Law of Supply states- Ceteris Paribus, which indicates that factors other than price remain constant and that there is a direct relationship between commodity price and supply. As a result, the firm's commodity price cannot remain constant.
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