Country A and country B are the same except country A currently has more capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then
A)output in country A increases by more than in country B.
B)output in country A increases by the same amount as in country B.
C)output in country A increases by less than in country B.
D)None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

Diminishing returns implies that as you add more units of a input factor (such as capital), the increase in output would eventually decrease. Since country A already has more capital, the increase in output from adding another 100 units would be less than in country B. Therefore, option C is correct.

Country a and Country B Are the Same Except Country