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

question 18

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.

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