Question

Consider the economies of Hermes and Gobbledigook, both of which produce gaggles of gop using only tools and workers. Suppose that, during the course of 50 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.
Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2014 and 2034.
Year
Hermes
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Gaggles of gop) (Gaggles per worker)
2014 11 30 3,000
2034 15 30 3,600
Year
Gobbledigook
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Gaggles of gop) (Gaggles per worker)
2014 8 30 2,400
2034 12 30 3,600
Initially, the number of tools per worker was higher in Hermes than in Gobbledigook. From 2014 to 2034, capital per worker rises by 4 units in each country. The 4-unit change in capital per worker causes productivity in Hermes to rise by a (larger or smaller)?? amount than productivity in Gobbledigook. This illustrates the concept of (brain drain or increasing return or inward oriented growth or diminishing returns or constant return?)??? , which makes it (easier or more difficult ??) for countries with low output to catch up to those with higher output.

Answer 1

The productivity (in terms of output per worker) of the economies of Hermes and Gobbledigook can be computed as follows:

1. Hermes

           Physical Capital    Labor Force    Output     Productivity

Year  (Tools per worker)    (Workers) (Gaggles   (Gaggles per

                                                                  of gop)           worker)

2014            11                         30              3,000      100 (3,000/30)

2034           15                        30              3,600         120 (3,600/30)

2. Gobbledigook

           Physical Capital    Labor Force    Output     Productivity

Year  (Tools per worker)    (Workers) (Gaggles   (Gaggles per

                                                                  of gop)           worker)

2014               8                       30              2,400           80 (2,400/30)

2034             12                      30               3,600         120 (3,600/30)

3. The 4-unit change in capital per worker causes the productivity in Hermes to rise by a smaller amount (20%) than the productivity in Gobbledigook (50%). This illustrates the concept of diminishing returns, which makes it easier for countries with low output to catch up to those with higher output.

What is the law of diminishing marginal returns?

The law of diminishing returns states that a developed nation's growth rates tend to slow as the economy matures, enabling developing nations to catch up with the former's growth.

Learn more about productivity and diminishing marginal returns here: brainly.com/question/11148440