When a firm adds physical capital,labor will become more productive in the short run.

Question

Quizplus · Accepted Answer

Adding physical capital, such as machinery or equipment, can improve the efficiency of labor and lead to higher productivity in the short run. This is because the new capital allows workers to produce goods or services more quickly and with less effort, thereby increasing output per hour worked. However, over the long run, the effects of physical capital on productivity may diminish as workers become accustomed to the new equipment and its benefits level off.

When a Firm Adds Physical Capital,labor Will Become More Productive