If the price of labor rises relative to the price of capital,the cost-minimizing ratio of capital usage to labor usage (i.e.,the ratio K/L)will
A)increase.
B)be unchanged.
C)decrease.
D)cannot determine without more information

Question

Quizplus · Accepted Answer

When the price of labor increases relative to the price of capital, firms will substitute labor with capital to minimize costs, leading to an increase in the capital-to-labor ratio (K/L).

If the Price of Labor Rises Relative to the Price