Which of the Following Statements Is True About an Economy

question 87

Multiple Choice

Which of the following statements is true about an economy whose production function includes only capital and labor?

• A)Diminishing returns to capital can occur for the economy as a whole.
• B)Adding more capital per worker cannot raise real GDP beyond some limit.
• C)The production function yields a pessimistic conclusion about economic growth.
• D)To get to the point where the return from an additional unit of capital equals zero requires an extremely large investment share of GDP.
• E)All of these

---

Definitions:

Capital

Those goods produced by the economic system that are used as inputs to produce other goods and services in the future.

Labor

The effort that people contribute to the production of goods and services in an economy, typically measured in terms of hours worked.

Production Function

A mathematical equation that describes the maximum amount of output that can be produced from a given set of inputs.

Labor Input

This denotes the amount of work effort, measured in hours or the number of employees, used in the production of goods and services.