Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will increase output ________ in Alpha compared to Beta, holding other factors constant.

Question

Quizplus · Accepted Answer

Since Alpha starts out with more capital per worker, the marginal increase in worker output in Alpha is less than the marginal increase in Beta (where workers have much less capital to begin with).

Alpha Has $40,000 of Capital Per Worker, While Beta Has