Increases in both labor and capital productivity will result in:
A)downward shift of the average and marginal product curves and upward shift of the average cost curves.
B)downward shift of the average and marginal product curves and downward shift of the average cost curves.
C)upward shift of the average and marginal product curves and downward shift of the average cost curves.
D)upward shift of the average and marginal product curves and upward shift of the average cost curves.

Question

Quizplus · Accepted Answer

The increase in labor and capital productivity will lead to an increase in output for a given input. This increase in productivity will shift both the average and marginal product curves upward. As a result of the increased productivity, the firm can produce more output with the same amount of input, resulting in a downward shift of the average cost curves. Thus, (C) is the best choice.

Increases in Both Labor and Capital Productivity Will Result In