Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. All else equal, if the price of each unit of input decreased from $30 to $20, then productivity would:
A) Increase from $40 to $90 and aggregate supply would decrease
B) Increase from $50 to $60 and aggregate supply would decrease
C) Increase from $60 to $70 and aggregate supply would increase
D) Remain unchanged but aggregate supply would increase

Question

Quizplus · Accepted Answer

Productivity, defined as output per unit of input, remains unchanged at 40 (2400/60) because the output and input quantity remain the same. However, the decrease in input cost increases aggregate supply.

Suppose That an Economy Produces 2400 Units of Output, Employing