Answer
The answer to part C, above, does indeed bear out the contention that “The market system causes the economy to conserve most in the use of resources that are particularly scarce in supply. Resources that are scarcest relative to the demand for them have the highest prices. As a result, producers use these resources as sparingly as is possible.” Because of an increased supply of labor, the price per unit of resource went down. The technique that used labor the most was Technique 1, whose price turned out to be the lowest after the recalculation of the total cost of production for each technique.
Work Step by Step
The contention, “The market system causes the economy to conserve most in the use of resources that are particularly scarce in supply. Resources that are scarcest relative to the demand for them have the highest prices. As a result, producers use these resources as sparingly as is possible.”, essentially boils down to the idea that if there is more of a resource, there will be less demand for it, causing the price to drop (and vice versa with scarce resources). In part C, the supply of labor in the market was increased, lowering the price. Because Technique 1 used the most labor in its production of A, its price was lowered the most by the change in labor cost.
