Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker: more in Lowland. more in Highland. in Highland, but not in Lowland. by the same amount in Highland and Lowland.

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Business

Cole Fisher

24 February, 17:37

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker: more in Lowland. more in Highland. in Highland, but not in Lowland. by the same amount in Highland and Lowland.

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Tamara Hughes · Answer 1

more in Lowland.

Explanation:

Of Highland has more capital per worker then it means that the level of capitalisation of production is higher than in the Lowland.

Due to the law of diminishing returns the highly capitalised economy of the Highland will only have little increase in productivity with additional capital.

However an additional capital input in the Lowland will lead to a larger increase in productivity as this economy is not yet subject to the law of diminishing returns.