Texas A&M University (TAMU) ECON410 Macroeconomic Theory Practice Exam 1

In the context of a production function, it is crucial to understand how different inputs are represented and analyzed. The capital-labor ratio typically refers to the amount of capital available per unit of labor used in production. When considering the X-axis in this context, the focus should ideally be on the representation of individual contributions from labor and capital.

Placing capital per worker on the X-axis makes sense since this allows us to analyze how varying levels of capital affect the output generated per worker. This setup can help in understanding the marginal productivity of capital while linking it directly to labor input. In production theory, representing capital per worker helps clarify the role of capital in productivity and efficiently illustrates the relationship between inputs and output in a more granular manner.

Total capital output is less relevant here as it does not focus specifically on the relationship between individual workers and their respective capital, while labor input on its own does not adequately account for the capital effect. Similarly, output per worker would be more appropriate on the Y-axis, as it represents the outcome of the production process rather than the input relationship. Thus, capital per worker provides the most meaningful perspective when assessing the production function's dynamics.