As capital per worker rises, output per worker rises. However, this increase in output per worker is smaller at larger levels of existing capital per worker.

Question

Quizplus · Accepted Answer

This phenomenon is known as the diminishing marginal product of capital. As more and more capital is added to the production process, the additional output gained from adding one more unit of capital decreases. Therefore, the increase in output per worker is smaller at higher levels of capital per worker.

As Capital Per Worker Rises, Output Per Worker Rises