Multiple Choice
A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?
A) Capital will be substituted for labor.
B) Labor will be substituted for capital.
C) Output increases as do the prices of capital and labor.
D) Output decreases as does the price of cars.
Correct Answer:
Verified
Correct Answer:
Verified
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