## Question

# A popular measure of productivity is the ratio of output ( say , real GDP ) to employment ( say , worker hours )

- A popular measure of productivity is the ratio of output $($say$,$ real GDP$)$ to employment $($say$,$ worker hours $)\text{}.$ In the graph of the production function that follows, this concept of productivity at the employment level I$1$ is given by the ratio Y$1/$L$1.$Productivity at this point equals the slope of the dashed line that is drawn from the origin to intersect the production function at the employment level $11.$

a$.$ For the production function shown and for the employment level I,

b. show graphically that productivity, y$/$l$,$ always exceeds the marginal product of labor, MPL$.$

c$.$ Assume now that the form of the production function does not change. But suppose that people shift their tastes and become more willing to work. That is$,$ at the initial fevels of work and consumption, each person requires a smaller addition in consumption to give up a umit of ieisure. What happens here to the choices of wotk effort, l$,$ and output, y $?$ What happens to productivity, y$/$l$?$

## y RO)

## Step by Step Solution

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