Let the wage rate climb. The marginal benefit schedule for capital must therefore shifts
A) up and to the right.
B) up and to the left.
C) down and to the right.
D) down and to the left.
E) along a demand curve to reflect higher demand for capital.

Question

Quizplus · Accepted Answer

When the wage rate increases, the marginal benefit of capital relative to labor increases because firms look to substitute labor with capital where possible. This makes capital more valuable, shifting the marginal benefit schedule for capital up and to the right as firms are willing to pay more for capital to save on higher labor costs.

Let the Wage Rate Climb