Suppose Labor and Capital Are Both Used to Produce Output

question 43

Multiple Choice

Suppose labor and capital are both used to produce output.In the long run, if the wage rate rises while the rental rate on capital remains unchanged,

• A)The process will become more labor intensive
• B)The process will become more capital intensive
• C)Market forces will come into play to bring the prices back to their earlier relationship
• D)The marginal product of capital will rise and the marginal product of labor will fall

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