Production and Distribution


Review Questions

1. What explains GDP?

 

 

 

2. What is productivity?  

 

3. What explains variations in labor productivity?

 

Answers

 

4. What explains variations in total factor productivity?

 

 

 

5. What determines how total output gets divided?

 

Old Exam Questions

1. What is labor productivity? What is total factor productivity? How does labor productivity in the United States compare with that in other countries? What could lead to international differences in labor productivity? What could lead to international differences in total factor productivity?

 

Answer:

Labor productivity is generally measured by output per worker or per unit of labor. Total factor productivity measures output per unit of all factors of production, not just labor. A "unit" is a weighted average of labor and capital (and any other factors of production, if there are more than two). The United States has the highest economy-wide labor productivity in the world, although Japan has higher labor productivity in some manufacturing industries. Differences in labor productivity are due to differences in capital-labor ratios and differences in total factor productivity. A higher capital-labor ratio or higher total factor productivity results in higher labor productivity. Differences in total factor productivity are due to differences in technology, education of the work force, competition, regulation, trade protection, and other political and institutional features that affect the efficiency with which inputs can be transformed into output.


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