Assume that capital and labor are complementary inputs. If the firm decreases 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 firmʹs MP schedule for labor to the left.
D) shift the firmʹs MP schedule for labor to the right.

Question

Quizplus · Accepted Answer

When capital and labor are complementary inputs, reducing the amount of capital employed would decrease the productivity of labor, effectively shifting the marginal product (MP) schedule for labor to the left, not moving along it.

Assume That Capital and Labor Are Complementary Inputs