The Output Per Worker Equation Y/L = a F(1, K/L

question 27

Multiple Choice

The output per worker equation Y/L = A F(1, K/L, H/L, N/L) provides a mechanical summary of the four determinants of:

• A)technology
• B)diminishing returns
• C)catch-up effect
• D)productivity

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Definitions:

Fixed Manufacturing Overhead

is the sum of all the production costs that do not change with the level of output, including costs like factory rent, salaries of permanent employees, and depreciation of factory equipment.

Direct Labour

Labor of employees engaged directly in the manufacturing process or production work, essential for creating the product.

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profitability through its fixed costs structure.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.