Suppose Labor and Capital Are Both Used to Produce Output

question 52

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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Definitions:

Abandonment

The act of relinquishing property, rights, or responsibilities without the intention of reclaiming them at a later date.

Leased Premises

Property rented under a lease agreement, where the lessee has the right to occupy and use the property for a specified term.

Rent Default

The failure to pay rent as stipulated in a lease agreement, potentially leading to eviction or legal action.

Eviction Proceedings

The legal process by which a landlord obtains a court order to remove a tenant from a leased property due to a violation of the lease agreement.