Table 7-4
-Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?

Question

Table 7-4  
-Table 7-4 shows a production relationship.The cost of one day of labor is $65 and the product price is $1 per unit.How much will the labor input increase if the capital stock were increased from 3 to 4?

Quizplus · Accepted Answer

Looking at the table, we can see that increasing the capital stock from 3 to 4 increases production from 15 to 20 units per day. In order to produce 20 units, the labor input would need to increase from 9 days to 12 days (since each day produces 2 units). Therefore, the labor input would increase from 4 to 5 (as each additional day of labor costs $65).