Scenario: Two Economies, a and B, Have Identical Aggregate Production

question 53

Multiple Choice

Scenario: Two economies, A and B, have identical aggregate production functions with diminishing returns. In both economies, capital and labor are equally important for production. Economy A has twice as many efficiency units of labor as economy B. Economy B has twice as much physical capital stock as economy A.
-Refer to the scenario above.Over time,economy A develops sophisticated technology,and human capital becomes less and less valuable in the production of goods and services that require more and more physical capital.How will this affect economy A's aggregate production function?

• A) It will shift up and become less steep if physical capital stock is held constant.
• B) It will shift up and become less steep if total efficiency units of labor are held constant.
• C) It will shift to the left if physical capital stock is held constant.
• D) It will shift to the left and become steeper if total efficiency units of labor are held constant.

---

Definitions:

Surface Runoff

Water from rain, snowmelt, or other sources that flows over the land's surface and is not absorbed into the ground.

Groundwater

Water held underground in the soil or in pores and crevices in rock.

Accounts Receivable

Funds that are due to a company from its customers for products or services that have been provided but remain unpaid.

Sales Revenue

The total income received by a company from its sales of goods or services, before any expenses are subtracted.