Consider a Hypothetical Economy in Which Only Computers and Shoes

question 95

Multiple Choice

Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital intensive compared with shoe production. If two resources are being used, labor and capital, then any increase in immigration in the long run:

• A) will cause the capital-labor ratio to increase in the computer industry.
• B) will cause the capital-labor ratio to increase in the shoe industry.
• C) will cause the capital-labor ratio to increase in both the industries.
• D) will increase the number of workers employed in the shoe industry.

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Definitions:

Straight-line Method

A method of depreciation that allocates an equal amount of the asset's cost to each year of its useful life.

Units-of-activity Method

A depreciation method that allocates an asset's cost based on its usage, activities, or units produced, rather than the passage of time.

Double-declining-balance Method

An accelerated depreciation method that doubles the depreciation expense compared to the straight-line method.

Depreciation Expense

Systematically dividing the expense of a tangible asset over the period it remains useful.