Question

Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital intensive as compared with shoe production. If two resources are being used -- labor and capital -- then the capital-labor ratio would be:

A. of an indeterminate relationship.
B. higher in the computer industry.
C. the same in both industries.
D. higher in the shoe industry

Answer 1

Answer:

B) higher in the computer industry

Explanation:

Two industries are given: computer and shoe industry.

it is given in the question that the computer industry is more capital intensive than the shoe industry. which means that the computer industry involves more investment than the shoe industry. Hence, if we calculate the capital and labor ratio then we get a high capital ratio for the computer industry because it includes high investment than shoe industry