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QUESTION
Assume a country uses labor and capital to produce two goods. Also assume labor is always mobile between industries, but the distribution of capital...
Assume a country uses labor and capital to produce two goods. Also assume labor is always mobile between industries, but the distribution of capital between industries is fixed in the short-run. An increase to the labor supply of this country will cause the production of both goods in this country to increase:A.In only the short-run.B.In only the long-run.C. In both the short-and long-run.D. In the long-run if one good is labor intensive and the other is capital intensive
Answer is option AIt will increase only in short run. Since in long run capital is also variable hence, the functionis dependent on both these factors in the long run.