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# HW Chapter 3 - Universidad Iberoamericana UNIBE BBA in...

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Universidad Iberoamericana UNIBE BBA in International Business Applied Macroeconomics Professor Carmen Lucia Sanchez Homework Chapter 3 Beatriz Asilis (10-1013) Xasica Rosario (10-0147) Maria G. Liriano (09-0881) Valerie Bodden K. (10-0014) May 13, 2011 Santo Domingo, Dominican Republic Review Questions

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1) What is a production function? What are some factors that can cause a nation’s production function to shift over time? What do you have to know besides an economy’s production function to know how much output the economy can produce? Production function is a mathematical expression relating the amount of output produced to quantities of capital and labor utilized. The production function can shift due to supply shocks, which affect overall productivity. A negative, or adverse, supply shock lowers the amount of output can be produced for each capital-labor combination. Besides knowing the production function, you must also know the quantities of capital and labor the economy has. 2) The production function slopes upward, but its slope declines from left to right. Give an economic interpretation of each of these properties of the production function. The upward slope of the production function means that any additional inputs of capital or labor produce more output. The slope declines as we move from left to right because diminishing marginal productivity. For a fixed amount of capital, each additional worker adds less additional output as the number of workers increases. For a fixed number of workers, additional capital adds less additional output as
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HW Chapter 3 - Universidad Iberoamericana UNIBE BBA in...

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