The former Soviet Union consistently increased the amount of capital available to its workers, but found that increases in capital resulted in progressively smaller and smaller increases in GDP per worker.This phenomenon is referred to as
A)a rising standard of living.
B)diminishing returns to capital.
C)new growth theory.
D)a shift of the per-worker production function.
E)diseconomies of scale.

Question

Quizplus · Accepted Answer

Diminishing returns to capital occurs when adding more capital to an existing labor force results in decreasing marginal output. This is what the former Soviet Union experienced as they increased the amount of capital available to workers but found that the increase in GDP per worker became smaller and smaller.

The Former Soviet Union Consistently Increased the Amount of Capital