For a firm in the long-run, an increase in the market wage rate will cause it to

Question

For a firm in the long-run, an increase in the market wage rate will cause it to reduce the employment of labor. With fewer workers, the firm's marginal revenue product for capital

shifts downward leading the firm to use less capital.

shifts upward leading the firm to use more capital.

twists so that is becomes more elastic

is not affected.

shifts downward leading the firm to use less capital.

shifts upward leading the firm to use more capital.

twists so that is becomes more elastic

is not affected.

Explanation / Answer

With fewer labor, capital will be providing less output compared with more labor.

Thus firms marginal revenue product of capital will shift downward leading to use lesa capital with low marginal revwnue product for capital.

Thus ans is A

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