In the healthcare economy, as in many other markets, if the firm has a high capital-to-labor ratio, it is more responsive to changes in price due to the inability to easily switch production capacity because of the fixed nature of capital or the substitutability of labor for capital.

Question

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A high capital-to-labor ratio typically means the firm is less responsive to changes in price because capital is fixed and not easily adjusted, unlike labor which can be more flexible.

In the Healthcare Economy, as in Many Other Markets, If