Based on a Cobb-Douglas production function and perfect capital mobility, capital should flow to economies in which:
A) capital is relatively scarce.
B) capital is relatively abundant.
C) technological production capabilities are inferior.
D) labor is relatively scarce.

Question

Quizplus · Accepted Answer

Capital tends to flow to economies where it is relatively scarce because the marginal product of capital is higher in those economies, leading to potentially higher returns on investment.

Based on a Cobb-Douglas Production Function and Perfect Capital Mobility