An increase in the capital stock will:
A. Shift production function downward.
B. Shift the production function upward
C. Flatten the production function
D. Steepen the production function
The answer is B?
To determine the correct answer, let's first understand what the question is asking.
The capital stock refers to the total amount of physical capital (machines, buildings, equipment, etc.) that a company or an economy possesses. The production function represents the relationship between inputs (such as capital and labor) and outputs (such as goods or services) produced by a firm or an economy.
Now, let's analyze the options:
A. Shift production function downward: This option suggests that an increase in capital stock would cause the production function to shift downwards. However, this would be incorrect because an increase in capital stock typically leads to higher levels of production, not lower levels.
B. Shift the production function upward: This option suggests that an increase in capital stock would cause the production function to shift upwards. This is the correct answer. An increase in capital stock generally leads to an increase in productivity, which results in a higher output level for a given level of inputs.
C. Flatten the production function: This option suggests that an increase in capital stock would flatten the production function. However, the shape of the production function is determined by various factors, including the combination of inputs and their respective productivity. Increasing the capital stock alone may not necessarily flatten the production function.
D. Steepen the production function: This option suggests that an increase in capital stock would steepen the production function. However, increasing the capital stock typically leads to a more efficient use of resources and an increase in output, rather than a steeper production function.
Therefore, the correct answer is B: An increase in the capital stock will shift the production function upward.