Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.All else being equal, if the price of each input increased from $4 to $6, productivity would
A)fall from 2 to 3.
B)fall from 0.50 to 0.33.
C)rise from 1 to 2.
D)remain unchanged.

Question

Quizplus · Accepted Answer

Productivity is calculated as output per unit of input. Since the output and quantity of inputs remain the same, productivity remains unchanged despite the increase in input prices.

Suppose That Real Domestic Output in an Economy Is 20