If a firm is using a lot of capital and just a little labor, the marginal product of labor is_____ relative to the marginal product of capital making it _____ to substitute labor for capital.
A) low; more difficult
B) high; easier
C) high; more difficult
D) low; easier

Question

Quizplus · Accepted Answer

When a firm uses a lot of capital and just a little labor, the marginal product of labor is high because adding an additional unit of labor can significantly increase output when labor is scarce. This makes it easier to substitute labor for capital, as the high marginal product of labor means that a small increase in labor can replace a larger amount of capital while maintaining the same level of output.

If a Firm Is Using a Lot of Capital and Just