An increase in total factor productivity
A) changes neither the slope nor the position of the production function.
B) changes the slope but not the position of the production function.
C) changes the position but not the slope of the production function.
D) changes both the slope and the position of the production function.
E) keeps the marginal product of labour constant.

Question

Quizplus · Accepted Answer

An increase in total factor productivity enhances the efficiency with which inputs are used, shifting the production function upward and increasing its slope, indicating higher output for any given level of inputs.

An Increase in Total Factor Productivity