The following figure shows two aggregate production functions.

-Refer to the figure above.Which of the following best describes the difference between aggregate production functions 1 and 2?
A) Human capital is higher for function 1.
B) Physical capital stock is higher for function 1.
C) The returns for increases in physical capital stock are higher in function 1.
D) Better technology is employed in function 1.

Question

The following figure shows two aggregate production functions.
 
-Refer to the figure above.Which of the following best describes the difference between aggregate production functions 1 and 2?
A) Human capital is higher for function 1. 
B) Physical capital stock is higher for function 1. 
C) The returns for increases in physical capital stock are higher in function 1. 
D) Better technology is employed in function 1.

Quizplus · Accepted Answer

Function 1 lies above Function 2, indicating that for any given level of physical capital, output (GDP) is higher in Function 1. This is typically interpreted as the result of better technology or more efficient use of resources, rather than differences in capital stock or human capital directly.

The Following Figure Shows Two Aggregate Production Functions