If there are diminishing marginal returns to capital, such as postulated in economic production models, what is the marginal product of capital for low-income nations?
A) Their marginal products of capital are lower than in high-income nations.
B) Their marginal products of capital are higher than in high-income nations.
C) Their marginal products of capital are equal to their marginal products of labor.
D) Their marginal products of labor are increasing, causing labor migration.

Question

Quizplus · Accepted Answer

In economic models that assume diminishing marginal returns to capital, low-income nations typically have less capital per worker. Therefore, the marginal product of capital (the additional output from an additional unit of capital) is higher in low-income nations than in high-income nations, where capital is more abundant and each additional unit of capital produces less additional output.

If There Are Diminishing Marginal Returns to Capital, Such as Postulated