Question

When capital increases by ?K units and labor increases by ?L units, output (?Y) increases by:...

When capital increases by ?K units and labor increases by ?L units, output (?Y) increases by:

A.

MPL + MPK units.
B.

(MPL × ?K) + (MPK × ?K) units.
C.

(MPK × ?K) + (MPL × ?L) units.
D.

?K + ?L units.
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Answer #1

Option C.

Explanation: MPL refers to the additional output when labor is increased by 1 unit and all other inputs are fixed.  MPK refers to the additional output when capital is increased by 1 unit and all other inputs are fixed. So, when capital increases by K units, total products increases by MPK * K. Similarly, So, when labor increases by L units, total products increases by MPL* L units. So, combined, total product increases by (MPK × K) + (MPL × L) units.

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