Constant returns to scale implies that if N and K both increase by 3% that

2.	Constant returns to scale implies that if N and K both increase by 3% that
		A) Output (Y) will increase by 3%.
		B) Y/N will increase by 3%.
		C) Y/N will increase by less than 3%.
		D) the capital-labor ratio will increase by 3%.
4.	Which of the following statements is always true?
		A) Investment equals depreciation.
		B) Investment equals the capital stock minus depreciation.
		C) The capital stock is equal to investment minus depreciation.
		D) Any change in the capital stock is equal to investment minus depreciation.
5.	The capital-labor ratio will tend to decrease over time when
		A) investment per worker equals saving per worker.
		B) investment per worker is less than saving per worker.
		C) investment per worker exceeds depreciation per worker.
		D) saving per worker equals depreciation per worker.

Solutions

Expert Solution

Answer 2 :- Option 'a' is the correct Answer

Constant returns to scale implies that if N and K both increase by 3% that Output (Y) will increase by 3%.

A constant returns to scale means that the proportionate increase in input is exactly equal to the increase in output.

Answer 4 :- Option 'd' is the correct Answer

Any change in the capital stock is equal to investment minus depreciation.

capital stock means that, for a single firm, the current market value of a firm's plant, equipment, inventories, and intangible assets.

investment is the new capital additions to a firm's capital stock. Although capital is measured at a given point in time (a stock), investment is measured over a period of time (a flow). The flow of investment increases the capital stock.

Answer 5 :- Option 'b' is the correct Answer

The capital-labor ratio will tend to decrease over time when investment per worker is less than saving per worker.

The capital-to-labor ratio measures the amount of capital available per worker and is weighted by the share of capital in national income." Natural resources. defined as the quantity of goods and services (real GDP) that a worker can produce in one hour of work.

Rahul Sunny answered 1 year ago

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