Assume that the Vian Company is renting capital and hiring labor such that the bang per buck from each resource is the same. If wages of labor increase, its use of labor _________ and capital _________.
A) increases; falls
B) falls; falls
C) increases; increases
D) stays the same; falls
E) falls; increases

Question

Quizplus · Accepted Answer

When the wage of labor increases, the cost of labor becomes higher relative to capital. To maintain the same bang per buck, Vian Company will reduce its use of labor and increase its use of capital.

Assume That the Vian Company Is Renting Capital and Hiring