Answer to Question #283634 in Economics for Saldisha

Question

If the economy’s output function is given as , where y=(Y/L) and k = (K/L), the average productivity of capital diminishes as k increases. True/False

Other things the same, in the Solow model in the steady state, a higher rate  of population growth leads to an increase in the level of output per worker True/False

Answer 1

The law of diminishing marginal productivity (not average) states that input cost advantages typically diminish marginally as production levels increase.

So, the statement is false.

In the Solow model, an increase in the population growth rate raises the growth rate of aggregate output but has no permanent effect on the growth rate of per capita output. An increase in the population growth rate lowers the steady-state level of per capita output.

So, the statement is false.