Suppose a technological improvement increases the productivity of a firm\'s capi

Question

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that:

the firm will use relatively more capital and relatively less labor.

the firm will use relatively more labor and relatively less capital.

inputs of capital and labor will be unchanged.

the firm's equilibrium output will necessarily increase

the firm will use relatively more capital and relatively less labor.

the firm will use relatively more labor and relatively less capital.

inputs of capital and labor will be unchanged.

the firm's equilibrium output will necessarily increase

Explanation / Answer

The firm will use relatively more capital and relatively less labor.

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