Figure 25-1.On the horizontal axis,K/L represents capital (K)per worker (L).On the vertical axis,Y/L represents output (Y)per worker (L).
-Refer to Figure 25-1.The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?
A)In the long run,a higher saving rate leads to a higher growth rate of productivity.
B)In the long run,a higher saving rate leads to a higher growth rate of income.
C)Returns to capital become increasingly smaller as the amount of capital per worker increases.
D)All of the above are correct.

Question

Figure 25-1.On the horizontal axis,K/L represents capital (K)per worker (L).On the vertical axis,Y/L represents output (Y)per worker (L). 
-Refer to Figure 25-1.The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?
A)In the long run,a higher saving rate leads to a higher growth rate of productivity. 
B)In the long run,a higher saving rate leads to a higher growth rate of income. 
C)Returns to capital become increasingly smaller as the amount of capital per worker increases. 
D)All of the above are correct.

Quizplus · Accepted Answer

The curve represents the relationship between output per worker and capital per worker. As capital per worker increases, the marginal product of capital decreases, resulting in a curve that becomes flatter as it moves to the right. This is consistent with statement C, which describes diminishing returns to capital. Statements A and B may also be true, but they are not consistent with the shape of the curve.