What is a consequence of factor immobility in firms?
Understand the Problem
The question is asking about the impact that factor immobility has on firms, specifically the drawbacks of not being able to relocate resources effectively. The choices provided suggest various outcomes related to resource allocation and production efficiency.
Answer
Factor immobility causes inefficient resource allocation and market failure.
A major consequence of factor immobility in firms is the inefficient allocation of resources, which leads to a Pareto inefficient outcome and contributes to market failure.
Answer for screen readers
A major consequence of factor immobility in firms is the inefficient allocation of resources, which leads to a Pareto inefficient outcome and contributes to market failure.
More Information
Factor immobility can be due to geographical or occupational factors, leading to underutilization of resources and inefficiencies in the market.
Tips
A common mistake is not recognizing the distinction between occupational and geographical immobility, both of which contribute to different kinds of inefficiencies.
Sources
- Factor immobility - Economics Help - economicshelp.org
- Causes & Consequences (Cambridge (CIE) IGCSE Economics) - savemyexams.com
- Factor Immobility (Labour Markets) | Reference Library - Tutor2u - tutor2u.net
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