Assume the production function is represented by Y = F (K, AN). Now suppose the variable, A, increases by 20%. This implies that:
A) the same output can be produced with 20% more labour.
B) the same output can be produced with 20% less labour.
C) the same quantity of labour can produce half the output.
D) the same output can be produced with half the capital.
E) the same quantity of labour can produce twice the output.

Question

Quizplus · Accepted Answer

An increase in the variable A, which typically represents technology or productivity in the production function Y = F(K, AN), means that each unit of labor (N) is now more productive due to the 20% increase in A. Therefore, to produce the same level of output (Y), less labor would be required, making option B correct.

Assume the Production Function Is Represented by Y = F