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Sagot :
Answer:
The firm will use labor intensive technology when the marginal product of using labor intensive technology is greater than the marginal produce of capital intensive technology
Explanation:
Marginal product is the change in total product when the amount of input used in changed by 1 unit
When choosing which form of technology to use, a firm would choose the technology that yields the highest marginal product
For example, imagine a firm can choose between using labour or capital in its production. When labour is increased frim 10 to 20 units, output increase from 100 to 500 units
when capital is increased frim 10 to 20 units, output increase from 100 to 200 units
Marginal product of labour = 500 - 100 / ( 20 - 10) = 40
Marginal product of capital = (200 - 100) / (20 - 10) = 20
Marginal product of labour is higher than the Marginal product of capital. the firm should be labour intensive
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