Assume That Labor and Capital Are Complements in Production and That

question 58

Multiple Choice

Assume that labor and capital are complements in production and that the wage declines. Which of the following statements best describes the adjustment in the use of labor?

• A) Adjustments in labor use are not influenced by adjustments in capital use.
• B) The MRP_L curve shifts downward in this case.
• C) More labor is used both because of the reduced wage and increased use of capital.
• D) Changes in labor use are indeterminate because the reduced wage and reduced use of capital have opposite influences on the use of labor.

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular period or item.

Actual Level

The real, measured level of production, performance, or activity, as opposed to planned or theoretical levels.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular category or period, indicating over or under spending.

Planning Budget

A financial plan that estimates the revenue and expenses for a specific period, often used for setting performance expectations.