The production function may have the same marginal products, yet the production constant term, A, may differ. Today, most economists believe this is caused by:
A) differences in technology.
B) differences in social efficiency of production (factors affecting production, such as policies, work ethic, education, institutional infrastructure, or cultural differences).
C) corruption and a poor regulatory climate.
D) gender bias.

Question

Quizplus · Accepted Answer

The social efficiency of production can influence the production constant term, A, which represents the level of technology and other production factors not accounted for by the inputs. Factors such as policies, work ethic, education, institutional infrastructure, or cultural differences can all affect A, even if the marginal products of inputs remain the same.

The Production Function May Have the Same Marginal Products, Yet