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 measured as the ratio of output to the quantity of inputs. In this scenario, productivity is initially 20 units of output / 10 units of input = 2. An increase in the price of inputs does not affect the quantity of output or the quantity of inputs, so productivity remains at 2, unchanged.

Suppose That Real Domestic Output in an Economy Is 20