Assume that capital and labor are complementary inputs. If the firm increases the amount of capital it employs, this would
A) cause the firm to move down along the MP schedule for labor.
B) cause the firm to move up along its MP schedule for labor.
C) shift the firm's MP schedule for labor to the left.
D) shift the firm's MP schedule for labor to the right.

Question

Quizplus · Accepted Answer

When capital and labor are complementary inputs, increasing the amount of capital employed makes labor more productive. This is represented by a rightward shift in the firm's marginal product (MP) schedule for labor, indicating that each unit of labor can produce more output with more capital.

Assume That Capital and Labor Are Complementary Inputs