Question : Capital-intensive technique would get chosen in
Option 1: a labor surplus economy where the relative price of capital is lower.
Option 2: a capital surplus economy where the relative price of capital is lower.
Option 3: A developed economy where technology is better.
Option 4: developing economy where technology is poor.
Correct Answer: a capital surplus economy where the relative price of capital is lower.
Solution : The correct answer is (b) a capital surplus economy where the relative price of capital is lower.
A capital-intensive technique is a production technique that uses a lot of capital and relatively less labor. This type of technique is often chosen in economies where the relative price of capital is lower, such as in capital surplus economies. In a capital surplus economy, there is a lot of capital available, so the price of capital is relatively low. This means that it is cheaper to use capital-intensive techniques in these economies.
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