Different capital intensity in different industries is mainly explained by _______ and ________?
Correct answer: B. technology, the ease of factor substitution
- A. wage differentials, skill levels
- B. technology, the ease of factor substitution
- C. government grants, international competition
- D. patents, skill shortages
Explanation
Industries use different capital intensities because their technologies differ and because they differ in how easily capital can substitute for labour. If substitution is difficult, firms need a relatively fixed combination of both factors.
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