Two Economies Are Identical Except That the Level of Capital

question 12

Multiple Choice

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

• A) more in Highland.
• B) more in Lowland.
• C) by the same amount in Highland and Lowland.
• D) in Highland, but not in Lowland.

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Definitions:

Net Present Value

A method used in finance to assess the value of an investment by calculating the present value of its expected future cash flows minus the initial investment.

Policy Change

Modifications or adjustments to existing rules, procedures, or regulations within an organization or government.

Mandatory Separation

A policy or regulation requiring a business to divide or split its operations, often for anti-monopoly or regulatory compliance reasons.

Recyclables

Materials or products that can be converted into reusable material through the recycling process.