In a small Asian country, it is estimated that changing the level of capital from $8 million to $12 million will increase real GDP from $5 million to $6 million. If the number of hours worked in the labour force does not change, what does this information tell you about the slope of the per-worker production function in this range?
A)The slope is -4.
B)The slope is 1/4.
C)The slope is 2.
D)The slope is 4.
E)The slope is 8.

Question

Quizplus · Accepted Answer

The change in real GDP ($1 million) divided by the change in capital stock ($4 million) gives us the marginal product of capital.

Marginal product of capital = ($6 million - $5 million) / ($12 million - $8 million) = $1 million / $4 million = 1/4

Since the per-worker production function shows how much output each worker can produce with a given amount of capital, the slope of the per-worker production function is the marginal product of capital.

Therefore, the answer is B, the slope is 1/4.

In a Small Asian Country, It Is Estimated That Changing