An increase in total factor productivity shifts the production function
A)upward and increases the marginal product of labour.
B)downward and decreases the marginal product of labour.
C)upward and decreases the marginal product of labour.
D)upward and increases the marginal product of capital.
E)downward and increases the marginal product of labour.

Question

Quizplus · Accepted Answer

An increase in total factor productivity means that for a given amount of inputs (capital and labor), the output increases. This shift in the production function is upward. As a result, the marginal product of labor also increases since more output can be produced with the same amount of labor. Therefore, the correct choice is A.

An Increase in Total Factor Productivity Shifts the Production Function