Choice "A" is correct. In the long run, a firm may experience increasing returns due to economies of scale which come into full play only if a large enough number of units is being produced to make it worth while to set up a fairly elaborate productive organization.
Choice "d" is incorrect. The principle of substitution states that people tend to shift their buying from relatively expensive to relatively cheap goods. Thus, if the price of a product falls, people tend to buy more of it and less of other (relatively) more expensive products.
Choice "b" is incorrect. The law of diminishing returns states that an increase in labor or capital beyond a certain point causes a less-than-proportionate increase in production.
Choice "c" is incorrect. The principle of comparative advantage states that even if one of two regions is absolutely more efficient in the production of every good than is the other, if each region specalizes in the products in which it has a comparative advantage (greatest relative efficiency), trade will be mutually profitable to both regions. Real wages of productive factors will rise in both places. This principle is the basis for international trade.
