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. |
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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