A firm purchases more capital equipment. We would expect to observe

Question

Quizplus · Accepted Answer

Purchasing more capital equipment indicates that the firm intends to increase its production. This, in turn, increases the demand for labor by the firm, as it needs more workers to operate and maintain the new equipment. There is no direct relationship between the purchase of capital equipment and the supply or wage rate of labor, so options A and D are incorrect. Option B is also incorrect because an increase in capital equipment does not necessarily lead to an increase in the supply of labor.

A Firm Purchases More Capital Equipment