Let Kj and Lj denote the capital and labor inputs in the production of good j (j = S,T),then good S is said to be capital intensive relative to good T if A)KS KT. B)KS/LS KT/LT. C)LS

Question

Let Kj and Lj denote the capital and labor inputs in the production of good j (j = S,T),then good S is said to be capital intensive relative to good T if
A)KS > KT.
B)KS/LS > KT/LT.
C)LS < LT.
D)All of the above.

Quizplus · Accepted Answer

The definition of capital intensity is the amount of capital used relative to labor in the production of a good. Therefore, option B correctly represents this definition by comparing the ratios of capital to labor between the two goods. Option A only compares the levels of capital, which does not capture the relative intensity of capital. Option C compares the levels of labor, which is not relevant to determining capital intensity. Thus, option B is the best choice.

Let Kj and Lj Denote the Capital and Labor Inputs