Final answer:
a) The change from Q=√KL to Q=KL in a firm's production function suggests technological progress because it indicates a more efficient use of capital and labor, leading to a proportional increase in output.
b) This change is considered neutral as it doesn't preferentially save labor or capital, affecting both inputs equally.
Step-by-step explanation:
a) A student asked whether the change in a firm's production function from Q=√KL to Q=KL represents technological progress and if it is labor saving, capital saving, or neutral.
The initial production function indicates that output (Q) is a function of the square root of the product of capital (K) and labor (L), reflecting a certain efficiency in combining these factors of production.
As capital and labor increase, the increase in output diminishes because of the square root.
However, when the production function changes to Q=KL, it implies a linear and proportional relationship between output and the inputs of capital and labor. This indicates that for every additional unit of labor or capital added, output increases by the same amount.
Consequently, this change reflects technological progress because it shows an increased efficiency and effectiveness in the production process, enabling a direct and increased contribution from both inputs.
b) This change can be considered neutral because it does not favor either capital or labor in terms of savings or productivity improvements. Both inputs experience the same proportional effect on output.