An increase in total factor productivity shifts the production function

Question

Quizplus · Accepted Answer

An increase in total factor productivity means that more output can be produced with the same amount of inputs. This shifts the production function upwards, indicating that more output can be produced at every level of input. This also increases the marginal product of labour, as every unit of labour can now produce more output than before. Therefore, the correct choice is D - upwards and increases the marginal product of labour.

An Increase in Total Factor Productivity Shifts the Production Function