-Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?
A)from 3 to 4
B)from 4 to 5
C)from 4 to 6
D)stays the same

Question

-Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?
A)from 3 to 4 
B)from 4 to 5 
C)from 4 to 6 
D)stays the same

Quizplus · Accepted Answer

According to the production relationship in Table 7-4, increasing the capital stock from 3 to 4 will increase the labor input from 4 to 5. This is because the production function exhibits constant returns to scale, where increasing inputs proportionally increases output. Therefore, the labor input must increase by the same amount as the capital stock increase (i.e., from 3 to 4) to maintain constant returns to scale.

-Table 7-4 Shows a Production Relationship