Question

If Galaxia has a GDP that is 10 times larger than that of Myopia, which country would likely have greater marginal returns to capital based on the law of diminishing marginal returns to capital?
Galaxia

Both countries would have marginal returns to capital equal to 0 due to diminishing returns.

Both countries would have equal marginal returns to capital.

Myopia

Answer 1

Since Galaxia economy is 10 times larger than myopia‘s, it is fair to assume that the capital stock in Galaxia is larger than in myopia. Given the law of diminishing marginal returns - the notion is that as additional capital is used to produce a good, the increments to output decrease - the marginal return to capital in Galaxia is not greater than myopia.

Therefore the answer is d) Myopia