Suppose a forestry firm increases its investment in new technology for its sawmills.The firm employs both skilled and unskilled workers.After this new investment the wage gap between skilled and unskilled workers:
A)is likely to be unaltered
B)is likely to fall
C)will rise only if marginal productivity of unskilled workers is not altered
D)is likely to rise

Question

Quizplus · Accepted Answer

The investment in new technology for sawmills would increase the productivity and efficiency of the skilled workers, as they are likely to operate and maintain the new machines. This would increase their marginal productivity and hence, their wages are likely to rise. On the other hand, the unskilled workers may not have skills to operate or adapt to the new technology, reducing their marginal productivity. Therefore, the wage gap between the skilled and unskilled workers is likely to widen, indicating a rise in the wage gap.

Suppose a Forestry Firm Increases Its Investment in New Technology