A Key Assumption of the Solow Model Is

question 148

Multiple Choice

A key assumption of the Solow model is

• A) increasing returns to labor and diminishing returns to capital.
• B) diminishing returns to capital only.
• C) diminishing marginal product of capital and labor.
• D) diminishing marginal product of capital and increasing marginal product of labor.
• E) constant marginal product of capital only.

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Definitions:

Marginal Utilities

The supplementary utility or satisfaction received by using one more unit of a good or service.

Lemonade

A sweetened beverage made from lemon juice, water, and sugar, often associated with simple entrepreneurial ventures like lemonade stands.

Popcorn

A type of corn kernel which expands and puffs up when heated, often consumed as a snack.

Perfect Complements

Goods that are always used together in fixed proportions, such that an increase in the consumption of one necessitates an equal percentage increase in the other.