2. Output and Growth (a) Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (i) If firm's production functions exhibit diminishing marginal product of both capital and labor, then an increase in capital will result in an increase in the marginal product of capital. (ii) If total factor productivity and the number of workers both rise, then real wages will be unchanged. (iii) In the Solow model with technological progress, if the efficiency of labor is increasing at rate g, then in steady state both the real wage and the real rental price of capital also grow at rate g.
2. Output and Growth (a) Indicate whether the following statement is true, false, or uncertain and explain your answer using words, graphs and equations as appropriate. (i) If firm's production functions exhibit diminishing marginal product of both capital and labor, then an increase in capital will result in an increase in the marginal product of capital. (ii) If total factor productivity and the number of workers both rise, then real wages will be unchanged. (iii) In the Solow model with technological progress, if the efficiency of labor is increasing at rate g, then in steady state both the real wage and the real rental price of capital also grow at rate g.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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5
Transcribed Image Text:2.
Output and Growth
(a) Indicate whether the following statement is true, false, or
uncertain and explain your answer using words, graphs and
equations as appropriate.
(i) If firm's production functions exhibit diminishing
marginal product of both capital and labor, then an
increase in capital will result in an increase in the
marginal product of capital.
(ii) If total factor productivity and the number of workers
both rise, then real wages will be unchanged.
(iii) In the Solow model with technological progress, if the
efficiency of labor is increasing at rate g, then in steady
slate both the real wage and the real rental price of
capital also grow at rate g.
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