If capital can only be used to produce shoes, land can only be used to produce beans, and labor is allocated to its most productive use, then in equilibrium A. Shoe wages > Bean wages B. Shoe wages < Bean wages C. Shoe wages = Bean wages
If capital can only be used to produce shoes, land can only be used to produce beans, and labor is allocated to its most productive use, then in equilibrium A. Shoe wages > Bean wages B. Shoe wages < Bean wages C. Shoe wages = Bean wages
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
If capital can only be used to produce shoes, land can only be used to produce beans, and labor is allocated to its most productive use, then in equilibrium
| A. |
Shoe wages > Bean wages |
|
| B. |
Shoe wages < Bean wages |
|
| C. |
Shoe wages = Bean wages |
Expert Solution
Step 1
Given capital and land are immobile and can only produce shoes and beans respectively, labor would be the mobile factor.
If labor is allocated to the most productive use, then the wages in both the sectors would be equal.
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