22 Questions
Increases in productivity result in a smaller difference between total revenues and total costs.
False
Labor productivity can decrease over time.
False
The production function is expressed as Y = f(K, L).
True
In the long-run, capital is a variable input.
True
As capital per worker increases, output per worker decreases.
False
Total factor productivity measures are not affected by technological progress.
False
Multifactor productivity measures the effect of technological progress on labor productivity.
True
In the short-run, output can be increased by increasing capital.
False
Labor productivity is measured by dividing output produced by the number of employees.
True
Multifactor productivity measures output per unit of labor only.
False
Increases in multifactor productivity result in increases in output, which is a direct contribution to a country's economic growth.
False
Measuring labor productivity isolates the contribution of capital inputs in the process.
False
Capital productivity is a measure of output per unit of labor.
False
Technical efficiency gains involve a movement towards eliminating best practices.
False
The Tornqvist Index is used to measure labor productivity.
False
Increases in multifactor productivity lead to decreases in real incomes.
False
Productivity is directly observable and can be measured directly.
False
Total Factor Productivity (TFP) is a measure of productivity that focuses on a single factor input.
False
Labor Productivity is a measure of productivity that focuses on many or all factor inputs.
False
Productivity can be estimated at the individual level.
False
One of the objectives of measuring productivity growth is to trace technical change.
True
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.
False
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.
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.
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