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Questions and Answers
Increases in productivity result in a smaller difference between total revenues and total costs.
Increases in productivity result in a smaller difference between total revenues and total costs.
False (B)
Labor productivity can decrease over time.
Labor productivity can decrease over time.
False (B)
The production function is expressed as Y = f(K, L).
The production function is expressed as Y = f(K, L).
True (A)
In the long-run, capital is a variable input.
In the long-run, capital is a variable input.
As capital per worker increases, output per worker decreases.
As capital per worker increases, output per worker decreases.
Total factor productivity measures are not affected by technological progress.
Total factor productivity measures are not affected by technological progress.
Multifactor productivity measures the effect of technological progress on labor productivity.
Multifactor productivity measures the effect of technological progress on labor productivity.
In the short-run, output can be increased by increasing capital.
In the short-run, output can be increased by increasing capital.
Labor productivity is measured by dividing output produced by the number of employees.
Labor productivity is measured by dividing output produced by the number of employees.
Multifactor productivity measures output per unit of labor only.
Multifactor productivity measures output per unit of labor only.
Increases in multifactor productivity result in increases in output, which is a direct contribution to a country's economic growth.
Increases in multifactor productivity result in increases in output, which is a direct contribution to a country's economic growth.
Measuring labor productivity isolates the contribution of capital inputs in the process.
Measuring labor productivity isolates the contribution of capital inputs in the process.
Capital productivity is a measure of output per unit of labor.
Capital productivity is a measure of output per unit of labor.
Technical efficiency gains involve a movement towards eliminating best practices.
Technical efficiency gains involve a movement towards eliminating best practices.
The Tornqvist Index is used to measure labor productivity.
The Tornqvist Index is used to measure labor productivity.
Increases in multifactor productivity lead to decreases in real incomes.
Increases in multifactor productivity lead to decreases in real incomes.
Productivity is directly observable and can be measured directly.
Productivity is directly observable and can be measured directly.
Total Factor Productivity (TFP) is a measure of productivity that focuses on a single factor input.
Total Factor Productivity (TFP) is a measure of productivity that focuses on a single factor input.
Labor Productivity is a measure of productivity that focuses on many or all factor inputs.
Labor Productivity is a measure of productivity that focuses on many or all factor inputs.
Productivity can be estimated at the individual level.
Productivity can be estimated at the individual level.
One of the objectives of measuring productivity growth is to trace technical change.
One of the objectives of measuring productivity growth is to trace technical change.
Full efficiency in an engineering sense means that a production process has achieved a certain percentage of the maximum amount of output that is physically achievable.
Full efficiency in an engineering sense means that a production process has achieved a certain percentage of the maximum amount of output that is physically achievable.
Study Notes
Productivity and Its Impact
- Increased productivity results in higher profits for the affected industry, ceteris paribus.
- Labor productivity can increase over time due to two basic factors: increased use of capital and technological progress.
Factors Affecting Productivity
- Increased use of capital (e.g., machines) in production increases the amount of capital per worker.
- Technological progress includes improvements in labor or capital.
Production Function
- The relationship between inputs and outputs can be expressed as: 𝑌 = 𝑓(𝐾, 𝐿)
- In per capita terms, the production function can be simplified as: 𝑦 = 𝑓(𝑘), where 𝑦 is output per worker and 𝑘 is the capital-labor ratio.
- Labor productivity is a function of the capital-labor ratio.
Short-run vs Long-run Productivity
- In the short-run, capital is fixed, and output can be increased by increasing labor.
- However, the law of diminishing marginal productivity of labor applies, and output cannot be increased indefinitely.
Measures of Productivity
- Single Factor Productivity:
- Labor Productivity: output per unit of labor, calculated by dividing output by labor input (number of employees or labor hours).
- Capital Productivity: output per unit of capital input.
- Multifactor Productivity (MFP) or Total Factor Productivity (TFP): output per unit of combined inputs, measuring the overall production efficiency of an industry or economy.
Importance of Multifactor Productivity
- Increases in multifactor productivity have crucial benefits for the economy and society.
- Increases in output contribute directly to economic growth.
- Increases in real incomes contribute to a rising living standard in the country.
Definition and Measurement of Productivity
- Productivity is defined as a ratio of a volume measure of output to a volume measure of input use (Output/Input).
- Productivity is not directly observable and is typically measured residually.
- Productivity can be estimated at various levels: industry, economic sector, or the economy.
- Objectives of productivity measurement include tracing technical change and achieving full efficiency in an engineering sense.
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Description
This quiz covers the concept of productivity in industries and firms, its effects on profits, prices, and labor compensation, and how it can increase over time.
