Economist Paul Romer argued that:
A)technological change was determined by forces outside of the market.
B)at the firm level, diminishing returns to labour occur.
C)at the economy level, knowledge capital is subject to increasing returns.
D)knowledge capital is excludable but rival.

Question

Quizplus · Accepted Answer

Romer's theory of endogenous growth emphasizes that increasing returns to knowledge capital, which is non-rival and non-excludable, can lead to sustained economic growth. This is in contrast to traditional neoclassical growth models which assume diminishing returns to physical capital and labor. Romer argues that knowledge capital is subject to increasing returns because it is possible to create new ideas and knowledge without necessarily using more physical capital and labor. Therefore, this choice best reflects Romer's argument.

Economist Paul Romer Argued That