In microeconomics a production function typically shows how

In microeconomics, a production function typically shows how output increases as more labor is used, so labor is on the horizontal axis and output on the vertical axis; in Chapter 9, figure 9-4 shows a different type of \"production function\" with real GDP per worker ____________as physical capital per worker increases. increasing at a constant rate. increasing at a decreasing rate. increasing at an increasing rate. decreasing.

Solution

The principle applicable here is diminishing marginal prodictivity. It is true that as labor increases output increase but not that each additional labor adds less and less in the output. Hence when real GDP per worker is increased for each additional increase in physical capital per worker, the increase gets smaller and smaller. This implies that it is increasing but at a decreasing rate.

Correct choice is increasing at a decreasing rate