Because of diminishing returns, an economy can continue to increase real GDP per hour worked only if
A)there are decreases in human capital.
B)the per-worker production function shifts downward.
C)there continue to be decreases in capital per hour worked.
D)there is technological change.
E)there continue to be increases in capital per hour worked.

Question

Quizplus · Accepted Answer

Diminishing returns occur when additional inputs yield decreasing marginal returns. To continue increasing real GDP per hour worked, an economy needs to improve productivity through technological change, which allows for the production of more goods and services with the same amount of inputs. None of the other options would be viable solutions in the long run as decreases in human capital or capital per hour worked would lower productivity, while a downward shift in the per-worker production function would mean that each additional worker hired would be less productive.

Because of Diminishing Returns, an Economy Can Continue to Increase