Suppose Our Firm Produces Chartered Business Flights with Capital (Planes)

Multiple Choice

Suppose our firm produces chartered business flights with capital (planes) and labor (pilots) in fixed proportion (i.e., one pilot for each plane) . If the wage rate paid to the pilots increases relative to the rental rate of capital for the airplanes, then:

A) the optimal capital-labor ratio should increase.
B) the optimal capital-labor ratio should decrease.
C) the optimal capital-labor ratio remains the same.
D) We do not have enough information to answer this question.