A company uses 100 workers and 30 units of capital to produce 500 units of output. If this company increases its capital to 50 units and, as a result, its output increases by 300 units, the productivity of labor ________ to ________ units per worker.
A) increases; 8
B) increases; 1
C) increases; 3
D) decreases; 4

Question

Quizplus · Accepted Answer

Initially, the productivity of labor is 500 units of output / 100 workers = 5 units per worker. After increasing capital, output increases to 800 units (500 + 300). With the same number of workers (100), the new productivity of labor is 800 units / 100 workers = 8 units per worker. Therefore, productivity increases to 8 units per worker.

A Company Uses 100 Workers and 30 Units of Capital