Sapling Learning Use the graph below to answer the following

Sapling Learning Use the graph below to answer the following questions. Suppose the production function shifts up from Y to Y Which of the following is the most likely reason? Output O New technology O Inflation Which of the following can increase incentives for the above C O O O The steady state Efficient institutions increases in physical capital Decreases in human capital Capital w

Solution

Cause of production function shift:

Production shifts due to improvement in technology.

Hence right answer is New Technology.

Incentives for shifts in production function:

Increase in Physical Capital.

Physical capital refers to the buildings, machinery, computer etc, availability of physical capital facilitates the research and development which leads to the development of new technology.