### Understanding Diminishing Returns and Patents in Economic Growth#### Question 1A country faces diminishing marginal returns when increasing its capital stock. If this country added 1,000 units of capital last year and saw their GDP rise by $500 per person, what would you expect to happen if they had added 2,000 units of capital instead?- O GDP would increase by another $500 per person- O GDP would increase by less than another $500 per person- O GDP would increase by more than another $500 per person- O It is impossible to tell what would happen#### Question 2What is a potential downside of using patents to promote the creation of new technology?- O Without a market test, patents might be given to technology which ends up being useless.- O Government money may be directed towards unproductive goals.- O It slows the spread and development of those ideas by restricting competition.- O They prohibit competition forever.#### Question 3What is the law of diminishing marginal returns?---### Analysis- **Diminishing Marginal Returns:** This economic principle signifies that as more units of a certain factor of production are added, the additional output generated from each new unit will eventually decrease. For instance, if a country significantly increases its capital units but the incremental gains in GDP per person start to drop, it indicates diminishing marginal returns.- **Patents and Innovation:** While patents are designed to encourage innovation by protecting the rights of inventors, there are several potential downsides. These include the risk of over-investing in technology without proven market potential, misallocation of government resources, potential stifling of competition, and enduring monopolies which can hinder technological progress and accessibility.### Learning Objectives- Understand the concept of diminishing marginal returns and its implications for economic growth.- Evaluate the impacts and potential drawbacks of using patents as a policy tool to foster technological innovation.

Diminishing marginal returns is defined as the decrease in production with the addition of more and…

A country faces diminishing marginal returns when increasing it's capital stock. If this country added 1,000 units of capital last year and saw their GDP rise by $500 per person, what would you expect to happen if they had added 2,000 units of capital instead? O GDP would increase by another $500 per person O GDP would increase by less than another $500 per person GDP would increase by more than another $500 per person O It is impossible to tell what would happen What is a potential downside of using patents to promote the creation of new technology? O Without a market test, patents might be given to technology which ends up being useless. O Government money may be directed towards unproductive goals. O It slows the spread and development of those ideas by restricting competition. O They prohibit competition forever.

A country faces diminishing marginal returns when increasing it's capital stock. If this country added 1,000 units of capital last year and saw their GDP rise by $500 per person, what would you expect to happen if they had added 2,000 units of capital instead? O GDP would increase by another $500 per person O GDP would increase by less than another $500 per person GDP would increase by more than another $500 per person O It is impossible to tell what would happen What is a potential downside of using patents to promote the creation of new technology? O Without a market test, patents might be given to technology which ends up being useless. O Government money may be directed towards unproductive goals. O It slows the spread and development of those ideas by restricting competition. O They prohibit competition forever.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 4P

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