Which of the following is true about total factor productivity (TFP)?
A)it can be measured just like capital and labor
B)it cannot be directly measured so it has to be calculated from given values of capital,labor and output
C)while it cannot be measured directly,it has an exponent of 0.3 in the Cobb-Douglas production function
D)while it cannot be measured directly,it has an exponent of 0.7 in the Cobb-Douglas production function
E)none of the above

Question

Quizplus · Accepted Answer

TFP is a residual factor that cannot be directly measured or observed. It is usually calculated as a residual from the difference between actual output and output that is accounted for by the inputs of labor and capital. Therefore, choice B is correct. Choices A, C, and D are incorrect as they suggest that TFP can be directly measured or has a specific exponent in the Cobb-Douglas production function, which is not true.

Which of the Following Is True About Total Factor Productivity