Homework SourseThe production function exhibits Diminishing returns to phys
The production function exhibits:
Diminishing returns to physical capital (if capital per worker is doubled, output per worker will increase but by less than 2x).
Constant returns to physical capital (if capital per worker is doubled, output per worker will also double).
Increasing returns to physical capital (if capital per worker is doubled, output per worker will increase by more than 2x).
Negative returns to physical capital (if there is an increase in the K/L ratio, output per worker will decrease).
| Diminishing returns to physical capital (if capital per worker is doubled, output per worker will increase but by less than 2x). | |
| Constant returns to physical capital (if capital per worker is doubled, output per worker will also double). | |
| Increasing returns to physical capital (if capital per worker is doubled, output per worker will increase by more than 2x). | |
| Negative returns to physical capital (if there is an increase in the K/L ratio, output per worker will decrease). |
Solution
Question 4: a. Diminishing returns to physical capital (if capital per worker is doubled, output per worker will increase but by less than 2x).
(The production function exhibits diminishing returns to physical capital in the short run which means that if capital is doubled, output will increase but bu less than the amount of increase in capital.)
Question 5: a. capital per worker
(K denotes capital and L denotes labor so K/L denotes capital per worker)
Question 6: c. Technology
(Developed countries have already took the advantages of their natural resouces to become developed so for further growth they require technological progress. Thus, technology is the most important driver of productivity growth for a developed country.)
