When the price of labor increases,
A) a firm will increase the amount of capital used in the short run because it is cheaper.
B) a firm will increase the amount of capital used in the long run because it is cheaper.
C) a firm will decrease the amount of capital used in the long run because it is more costly.
D) a firm will not change the amount of capital used in the long run because an increase in the price of labor does not affect capital.
E) it is ambiguous how the firm will adjust the level of capital in the long run.
Correct Answer:
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