All else constant,the choice of whether to use a labor-intensive production process or a capital-intensive one is depends on:
A)the absolute prices of capital and labor.
B)the relative prices of capital labor.
C)the type of market in which the firm operates.
D)whether the economy is growing or shrinking.

Question

Quizplus · Accepted Answer

The choice between a labor-intensive or a capital-intensive production process depends on the relative prices of capital and labor. If labor is cheap relative to capital, then it makes sense to use a labor-intensive process. If capital is cheaper relative to labor, then it is more efficient to use a capital-intensive process. Therefore, the relative prices of labor and capital play a crucial role in determining the best choice.

All Else Constant,the Choice of Whether to Use a Labor-Intensive