A firm is more likely to use a labor-intensive method of production when the relative amount of available labor is greater than the available amount of capital.

Question

Quizplus · Accepted Answer

When there is more labor available compared to capital, a labor-intensive method of production becomes more feasible and cost-effective for the firm. This is because labor-intensive methods rely more on the input of human labor rather than capital equipment. In contrast, when there is more capital available compared to labor, a capital-intensive method of production becomes more viable for the firm.

A Firm Is More Likely to Use a Labor-Intensive Method