The following figure shows the production function and the relationship between investment and physical capital stock for a given saving rate.

-Refer to the figure above.If the physical capital stock is fixed at $300,the GDP in this economy is ________.

Question

The following figure shows the production function and the relationship between investment and physical capital stock for a given saving rate.
 
-Refer to the figure above.If the physical capital stock is fixed at $300,the GDP in this economy is ________.

Quizplus · Accepted Answer

From the production function, we can see that at a physical capital stock of 300, the maximum output is obtained when the investment is $1,000. At this level of investment, GDP is $6,000. Thus, the GDP in this economy is $6,000 when the physical capital stock is fixed at $300.

The Following Figure Shows the Production Function and the Relationship