A firm becomes more labor-intensive when it:
A) reduces the ratio of output to capital.
B) increases the ratio of output to labor.
C) reduces the ratio of capital to labor.
D) increases the ratio of capital to labor.

Question

Quizplus · Accepted Answer

Becoming more labor-intensive means that the firm is employing more labor relative to capital. Therefore, reducing the ratio of capital to labor (as in option C) would result in a more labor-intensive firm. Options A and D suggest increasing the ratio of capital to labor, which would make the firm less labor-intensive. Option B suggests increasing the ratio of output to labor, which may or may not make the firm more labor-intensive, depending on whether this increase is achieved by employing more labor or improving labor productivity. Therefore, option C is the best choice.

A Firm Becomes More Labor-Intensive When It