Labor-augmenting technology causes which of the following? (i)
The marginal productivity of labor increases.
(ii)
The marginal productivity of labor decreases.
(iii)
Labor demand shifts to the right.
(iv)
Labor demand shifts to the left.
A)(i) only
B)(ii) only
C)(i) and (iii) only
D)(ii) and (iv) only

Question

Quizplus · Accepted Answer

Labor-augmenting technology increases the efficiency of labor, hence increasing the marginal productivity of labor. It also leads to an increase in labor demand, as firms would want to employ more workers to take advantage of the new technology. Therefore, the correct choices are (i) and (iii). The marginal productivity of labor would not decrease because the technology is augmenting labor, not reducing its efficiency. There is no reason for labor demand to shift to the left, as the technology is expected to increase efficiency and productivity of workers, making them more valuable to firms.

Labor-Augmenting Technology Causes Which of the Following? (I)