Question

Consider a small island country whose only industry is fishing. The following table shows information about the small economy in two different years.

Complete the table by calculating physical capital per worker as well as labor productivity.

Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor.

Year	Physical Capital	Labor Force	Physical Capital per Worker	Labor Hours	Output	Labor Productivity
	(Fishing poles)	(Workers)	(Fishing poles)	(Hours)	(Fish)	(Fish per hour of labor)
2025	160	40		1,800	14,400
2026	180	60		3,900	23,400

Based on your calculations,   in physical capital per worker from 2025 to 2026 is associated with   in labor productivity from 2025 to 2026.

Suppose you're in charge of establishing economic policy for this small island country.

Which of the following policies would lead to greater productivity in the fishing industry? Check all that apply.

Offering free public education to every worker in the country

Subsidizing research and development into new fishing technologies

Imposing restrictions on foreign ownership of domestic capital

Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts

Answer 1