The per-worker production function illustrates the fact that as the amount of capital per worker increases, output per worker _____

Question

20-04-2025
Business

High School

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The per-worker production function illustrates the fact that as the amount of capital per worker increases, output per worker _____

Answer :

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rudravelse67 rudravelse67 · Answer 1 · 2024-06-01T01:57:00-04:00

Final answer:

As the amount of capital per worker increases, output per worker initially rises but then experiences diminishing marginal returns, meaning the incremental gains in output decrease as more capital is added, given that other production factors remain constant.

Explanation:

The per-worker production function illustrates the concept that as the amount of capital per worker increases, output per worker also increases but at a diminishing rate due to diminishing marginal returns. This economic principle means that while additional capital does initially boost productivity, the rate of increase in output will eventually slow down. As more capital is added, the gains in output per worker become smaller because other factors of production remain constant, constraining additional productivity gains.

For example, if a factory has a fixed number of machines, allocating more capital in terms of tools or equipment per worker may initially lead to significant increases in output. However, once the most effective level of capital is reached, adding more capital results in lesser increases in output because the same number of machines limits the workers. This illustration emphasizes the importance of balanced growth among all factors of production to maintain efficiency.