An increase in foreign investment in Brazil's mining industry will increase the capital stock in Brazil.All else equal,as the capital stock increases,the marginal product of capital (MPK)will

Question

Quizplus · Accepted Answer

The statement mentions that "all else equal", an increase in foreign investment will increase the capital stock in Brazil. Therefore, we can assume that the labor input remains constant. According to the law of diminishing marginal returns, as more units of a variable factor (capital in this case) are added to a fixed factor (labor), the marginal product of that variable factor will eventually decrease. Hence, as the capital stock increases, the marginal product of capital (MPK) will decrease due to diminishing marginal returns.

An Increase in Foreign Investment in Brazil's Mining Industry Will