Other things the same, if the capital stock increases, then in the long run
A)both output and prices are higher.
B)output is higher and prices are lower.
C)output is lower and prices are higher.
D)both output and prices are lower.

Question

Quizplus · Accepted Answer

An increase in capital stock leads to an increase in the productivity of labor and hence increase in output. This increase in output will put downward pressure on prices in the long run due to increased competition among firms. Therefore, output will be higher and prices will be lower.

Other Things the Same, If the Capital Stock Increases, Then