Firms bring in combinations of labour and capital to produce output.How much output can be produced from a given combination of labour and capital depends on: if the production function of a country has constant returns to scale and all input of the country has increased by 100 per cent, then its output would increase by:
A)mineral resources, raw materials availability and other production specifics
B)primary factors of production
C)capital stock, education and the skills of the work force
D)the state of technology, managerial expertise, the skills of the work force and other factors

Question

Quizplus · Accepted Answer

The state of technology, managerial expertise, the skills of the work force and other factors determine how much output can be produced from a given combination of labour and capital. Even if all inputs increase by 100%, if the technology and skills of the workforce do not improve, output may not increase at the same rate. Therefore, choice D is the best answer.

Firms Bring in Combinations of Labour and Capital to Produce