Exhibit: The Capital-Labor Ratio

In this graph, starting from capital-labor ratio k , the capital-labor ratio will:
A)decrease.
B)remain constant.
C)increase.
D)first decrease and then remain constant.

Question

Exhibit: The Capital-Labor Ratio

In this graph, starting from capital-labor ratio k , the capital-labor ratio will:
A)decrease. 
B)remain constant. 
C)increase. 
D)first decrease and then remain constant.

Quizplus · Accepted Answer

The slope of the production function is increasing at the current level of capital-labor ratio, meaning that additional capital will lead to proportionally more output than additional labor. This will cause an increase in the capital-labor ratio.

Exhibit: the Capital-Labor Ratio