A company uses 50 workers and 20 units of capital to produce 400 units of output. If this company increases its capital to 30 units and, as a result, its output increases by 100 units, the productivity of labor ________ to ________ units per worker.
A) increases; 10
B) increases; 2
C) increases; 5
D) decreases; 4

Question

Quizplus · Accepted Answer

Initially, the productivity of labor is 400 units of output / 50 workers = 8 units per worker. After increasing capital, output increases to 500 units. The new productivity of labor is 500 units of output / 50 workers = 10 units per worker. Thus, productivity increases to 10 units per worker.

A Company Uses 50 Workers and 20 Units of Capital