Differences in output across economies with the same per capita capital stock can be explained by:
A) differences in labor.
B) differences in total factor productivity.
C) similarities in total factor productivity.
D) differences in resource use.
E) similarities in physical capital.

Question

Quizplus · Accepted Answer

Differences in output across economies with the same per capita capital stock can be explained by differences in total factor productivity. This refers to the efficiency with which all inputs (including labor, physical capital, and natural resources) are used in the production process. Therefore, even if two economies have the same amount of physical capital per worker, the one with higher total factor productivity will be able to produce more output per unit of input.

Differences in Output Across Economies with the Same Per Capita