When a firm adds physical capital,labour will become more productive in the short run.

Question

Quizplus · Accepted Answer

When a firm adds physical capital (such as machinery or equipment), it can increase the productivity of labour in the short run. This is because the new capital equipment can be used to perform tasks more efficiently or quickly, which allows for more output to be produced with the same amount of labour. However, in the long run, the law of diminishing returns will eventually set in and further investments in physical capital may not yield the same level of productivity gains.

When a Firm Adds Physical Capital,labour Will Become More Productive