In the relationship depicted by the curve Productivity1, which of the following statements are true regarding the relationship between physical capital per worker and real GDP per capita for both countries?

A. These countries experience diminishing returns to physical capital per worker with technology and physical capital per worker being fixed.
B. These countries experience increasing returns to physical capital per worker with technology and human capital per worker being fixed.
C. These countries experience increasing returns to physical capital per worker with physical and human capital per worker being fixed.
D. These countries experience diminishing returns to physical capital per worker with technology and human capital per worker being fixed.

The curve which represents the relationship between physical capital per employee and production per employee illustrates the value of human capital per employee and technologies.

Both Albernia and Brittania have decreasing returns on physical capital as the same incremental rises in physical capital per employee in both countries — continuous job retention in human capital and technology — will lead in smaller and less actual GDP changes per employee.

So, Both human capital per worker and technology are held fixed. Yes, there are diminishing returns.

asinghasingh07 asinghasingh07 · Answer 2 · 2025-02-01T02:17:00-05:00

Final answer:

The relationship between physical capital per worker and real GDP per capita illustrates diminishing marginal returns, where each additional unit of capital yields smaller increases in output. This effect is evident regardless of a country's income level, making the concept a fundamental principle in economics.

Explanation:

The relationship between physical capital per worker and real GDP per capita demonstrates the concept of diminishing marginal returns in the context of economic growth. This principle suggests that while increasing physical and human capital can boost GDP per capita, each additional unit of capital generates smaller increases in output. For instance, the initial increase in physical capital per worker, such as from $5,000 to $10,000, significantly enhances output. However, subsequent increases produce progressively smaller growth in output. This phenomenon is evident in both low- and high-income countries, though low-income countries may see a larger marginal effect due to their lower starting levels of capital. The statement that most accurately reflects this relationship is that these countries experience diminishing returns to physical capital per worker with technology and human capital being fixed, aligning with the option that emphasizes diminishing returns with certain factors held constant.