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

Answer :

Final answer:

In this scenario, an extra unit of capital per worker increases output per worker more in Lowland compared to Highland.

Explanation:

In this scenario, an extra unit of capital per worker increases output per worker more in Lowland. This is because the production function in Lowland exhibits a higher rate of increase in output with each additional unit of capital per worker compared to Highland. The production function in Highland also exhibits diminishing marginal product of capital, but the increase in output per worker is not as high as in Lowland.

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Answer:

more in Lowland.

Explanation:

Of Highland has more capital per worker then it means that the level of capitalisation of production is higher than in the Lowland.

Due to the law of diminishing returns the highly capitalised economy of the Highland will only have little increase in productivity with additional capital.

However an additional capital input in the Lowland will lead to a larger increase in productivity as this economy is not yet subject to the law of diminishing returns.