If capital and labor are gross complements in production,

Name: If capital and labor are gross complements in production,
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Question

Quizplus · Accepted Answer

If capital and labor are gross complements, it means that they need to be used in a fixed proportion to produce the good. This suggests that the scale effect will dominate, as any increase in one factor of production (e.g. capital) will require a proportional increase in the other factor (e.g. labor) to maintain the fixed proportion. Therefore, the answer is A.

If Capital and Labor Are Gross Complements in Production