### Understanding Diminishing Marginal Returns in Capital StockA country faces diminishing marginal returns when increasing its capital stock. Here is a conceptual question to help understand this economic principle:#### Question:If this country added 100 units of capital last year and saw their GDP rise by $1,000 per person, what would you expect to happen if they had added 200 units of capital instead?##### Options:1. It is impossible to tell what would happen2. GDP would increase by less than another $1,000 per person3. GDP would increase by another $1,000 per person4. GDP would increase by more than another $1,000 per person**Explanation:**The law of diminishing marginal returns suggests that, after a certain point, adding more of a factor of production (in this case, capital) will yield progressively smaller increases in output. So, if the first 100 units of capital increased GDP by $1,000 per person, adding an additional 100 units would likely result in a less proportional increase in GDP.#### Correct Answer:2. GDP would increase by less than another $1,000 per personThis is because the additional units of capital would add to the GDP, but by a smaller margin compared to the first increment of 100 units.

Answer: Diminishing marginal returns: if a particular input is increased keeping all other inputs…

A country faces diminishing marginal returns when increasing it's capital stock. If this country added 100 units of capital last year and saw their GDP rise by $1,000 per person, what would you expect to happen if they had added 200 units of capital instead? O It is impossible to tell what would happen O GDP would increase by less than another $1,000 per person GDP would increase by another $1,000 per person GDP would increase by more than another $1,000 per person

A country faces diminishing marginal returns when increasing it's capital stock. If this country added 100 units of capital last year and saw their GDP rise by $1,000 per person, what would you expect to happen if they had added 200 units of capital instead? O It is impossible to tell what would happen O GDP would increase by less than another $1,000 per person GDP would increase by another $1,000 per person GDP would increase by more than another $1,000 per person

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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