Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital intensive and shoe production is labor intensive. If two resources are being used, labor and capital, then the capital-labor ratio would be:
A) higher in the shoe industry.
B) lower in the computer industry.
C) the same in both industries.
D) higher in the computer industry.

Question

Quizplus · Accepted Answer

Since computer production is capital intensive, it requires a higher proportion of capital relative to labor. Therefore, the capital-labor ratio in the computer industry is higher than the capital-labor ratio in the shoe industry, which is labor intensive.

Consider a Hypothetical Economy in Which Only Computers and Shoes