An increase in total factor productivity shifts the production function
A) upward and increases the marginal product of labor.
B) upward and decreases the marginal product of labor.
C) downward and increases the marginal product of labor.
D) downward and decreases the marginal product of labor.

Question

Quizplus · Accepted Answer

An increase in total factor productivity means that more output can be produced with the same amount of inputs. Therefore, the production function shifts upward. This leads to an increase in the marginal product of labor, as each additional unit of labor can now produce more output due to the increase in productivity.

An Increase in Total Factor Productivity Shifts the Production Function