Econ 100B Section 5 Answers

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Unformatted text preview: causes an increase in total factor productivity, then once the economy has adjusted to its new equilibrium which of the following has increased? a) The real wage. b) The share of labor income in national income. c) The share of capital income in national income. d) All of the above. e) None of the above 3 SPRING 2014 ECONOMICS 100B VII. GSI: KRISTYN ABHOLD Analytical Question. 1) The figure below represents the production function relating output to capital in the United States. Suppose unusual weather conditions result in a higher than expected crop yield in the Midwestern states. a) Draw the new production function in the same graph. i) The unusually high crop yield is interpreted as a positive supply shock. This increases output for any given combination of capital and labor, shifting the production function upward. b) What is the effect on the marginal product of capital? i) The marginal product of capital increases as a result of the positive supply shock. Graphically this can be observed by a steeper slope at every capital level....
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