Question

Ceteris paribus, as the level of capital per worker rises, the level of output...

Select one:

a. falls at a decreasing rate

b. increases at a decreasing rate

c. falls at an increasing rate

d. increases at an increasing rate

Answer 1

Answer- Correct option is 'd'

Ceteris paribus, as the level of capital per worker rises, the level of output increases at an increasing rate. Increase in the level of capital per worker means an increase in the capital intensity. It increases output through technological improvements that enable higher output per worker. If the economy improves the capital per worker, productivity increases and it will experience economic growth. This is because the workers will be able to make more goods and services with better capital.