Suppose a Production Function Has Only One Input, Labor

question 28

Multiple Choice

Suppose a production function has only one input, labor. What can you tell about the slope of the production function, assuming output is on the y-axis and labor is on the x-axis, if production exhibits constant marginal returns to labor?

• A)The slope of the production function is positive and increasing exponentially.
• B)The slope of the production function is a positive constant.
• C)The slope of the production function is negative.
• D)The slope cannot be determined.

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Definitions:

Capital

Capital refers to financial assets or the financial value of assets, such as cash and buildings, used by a business to produce goods and services.

Slope

The rate at which a line inclines or declines, representing the ratio of the vertical change to the horizontal change between two points on the line.

Isocost Line

A graphical representation of all the different combinations of inputs that can be purchased with a specific total cost.

Price Of Capital

The cost of using capital goods in production, which includes interest rates paid on loans or the rate of return required by investors on capital.