f we have technological improvement (new tech), the production function will ____. If K/L increases, Y/L...

f we have technological improvement (new tech), the production function will ____.

If K/L increases, Y/L will ____.

Select one:

A. shift upward, shift upward

B. shift upward, increase along the same production function

C. shift downward, shift upward

D. shift downward, shift upward
(D) shift downward, increase along the same production function

Solutions

Expert Solution

Since there are four factors of production land, labor capital and entrepreneur. Some resources or factors of production are fixed in short-run and some are variable while in the long-run all factors of production are variable.

When there is a technological improvement (new tech), the production function will shifts upward because more output can be produced with the same inputs or less inputs.

When there is technological improvement (new tech), then less labor will be required to produce the same output, so the ratio of capital and labor will increase (K/L).

When there is a technological improvement (new tech), output level will increase, so the ratio of output to labor will increase.

Hence it can be said that with a technological improvement (new tech), the production function will shift upward.

If K/L increases, Y/L will increase along the same production function.

Hence option B is the correct answer.

Rahul Sunny answered 1 year ago

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