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Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will increase output ________ in Gamma compared to Omega, holding other factors constant.

A. less
B. more
C. by the same amount
D. not at all

Respuesta :

Answer:

The correct answer is option A.

Explanation:

Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker.  

Since Gamma has a higher capital per worker ratio, with the increase in the capital the increase in output will be less than Omega. This happens because of diminishing returns to capital.  

According to the law of diminishing returns, when the quantity of input is increased while other things are kept constant, the output per unit from that factor goes on decreasing.

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