Question

A firm has to choose between two technologies; both produce same output with one being labor intensive and other being capital intensive. The firm will use labor intensive technology when _________________. Select the correct answer below: wages are less than the interest rate total cost of labor is less than total cost of capital average variable cost is less than average fixed cost labor is more productive than capital

Answer 1

Answer:

total cost of labor is less than total cost

Explanation:

In the case when the firm would use the labor intensive technology at the time when the marginal product from labor intensive would be more than the marginal product of capital intensive this is due to the rise in the firm benefit as the firm would produce and sell more

The other thing is that the cost of labor intensive would be less than the capital intensive cost. This cost would benefit the organization with respect to the decision making