Suppose a Technological Improvement Increases the Productivity of a Firm's

question 135

Multiple Choice

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

• A)the firm will use relatively more capital and relatively less labor.
• B)the firm will use relatively more labor and relatively less capital.
• C)inputs of capital and labor will be unchanged.
• D)the firm's equilibrium output will necessarily increase.