Question

23 If the current total factor productivity increases, the following statement is correct ()

A Labor demand curve shifts to the right

B production function moves up

C Labor supply curve shifts to the right

D A and B are correct

24 If the current capital stock decreases, the following statement is correct ()

A Labor demand curve shifts to the left

B production function moves up

C Labor supply curve shifts to the right

D Output supply curve shifts to the right

Answer 1

Option D is correct. Total factor productivity is a part of production function. due to this reason it is a part of marginal product of capital and marginal product of labour. When it is increased it automatically increases the production as well as the marginal products. since labour demand curve is a function of marginal product of labour, it also shifts to the right

Option A is correct. Marginal product of labour is an increasing function of capital. If capital is decreased then marginal product of labour also decreases. Labour demand function is a function of marginal product of labour and therefore it also shifts to the left.