If the economy's production function is given by Output = A(physical capital)^.3(human capital)^.7(hours worked)^.7 Then the marginal product of physical capital is constant if A) hours worked are a declining function of human capital B) hours worked are a linear function of A C) the ratio of human capital to physical capital is constant D) total factor productivity (A) is independent of human capital E) physical capital is equal to total factor productivity

Question

Quizplus · Accepted Answer

The marginal product of physical capital is constant if and only if the ratio of human capital to physical capital is constant. If this ratio changes, then the marginal product of physical capital also changes, which indicates that it is no longer constant. The other choices are not related directly to physical capital's marginal product's constancy, and therefore, they are not the right choices.

If the Economy's Production Function Is Given by Output =