If the price of capital rises,in the long run the demand for labor
A) definitely increases.
B) definitely decreases.
C) definitely is unaffected.
D) could increase or decrease, depending on the change in the scale of production.
E) changes only if the supply of labor changes.

Question

Quizplus · Accepted Answer

When the price of capital rises, firms may adjust their production methods. If capital becomes more expensive, firms might use more labor if it's a substitute (increasing demand for labor), or they might reduce overall production scale if both inputs become too costly, potentially decreasing demand for labor. The effect on labor demand depends on the relative substitution between labor and capital and the overall impact on production scale.

If the Price of Capital Rises,in the Long Run the Demand