Suppose the production function for a certain device is q = L + K.If a labor-saving technical change has occurred,which of the following could be the new production function?
A) q = L + 5K
B) q = 5 ∗ (L + K)
C) q = 5L + K
D) All of the above are possible.

Question

Quizplus · Accepted Answer

A labor-saving technical change implies that the same level of output can now be produced with fewer units of labor, which means that the production function will now be more capital-intensive. Option A reflects this by increasing the weight of capital in the production function, while keeping the weight of labor the same. Options B and C involve a larger increase in either labor or capital, which are not necessary for a labor-saving technical change, and could result in overinvestment in one factor of production. Therefore, A is the best choice.

Suppose the Production Function for a Certain Device Is Q