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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter3: Scarcity, Trade-offs, And Production Possibilities

Section: Chapter Questions

Problem 5P

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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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