Educated people may generate ideas that increase production. These ideas a. are generally irrelevant for economic growth. b. are the source of personal benefits of education. c. produce a return to society from education that is greater than the return to the individual. d. never justify government subsides for education. The traditional view of the production process is that capital is subject to a. diminishing returns. b. diminishing returns for low levels of capital and increasing returns for high levels of capital. c. increasing returns. O d. constant returns ?
The correct answer and explanation is:
Correct Answers:
- C. Produce a return to society from education that is greater than the return to the individual.
- A. Diminishing returns.
Explanation:
Education plays a crucial role in economic growth and development. When individuals become more educated, they generate innovative ideas that improve productivity in various industries. These ideas often extend beyond personal benefits, influencing the broader society by enhancing overall economic output, technological advancement, and efficiency. This leads to what economists call positive externalities—benefits that spill over to society. Since individuals do not capture the full returns of their education (as society benefits as well), government subsidies for education are often justified. This explains why the correct answer to the first question is (C)—the return to society is greater than the return to the individual.
Regarding the second question, the traditional economic theory of production suggests that capital is subject to diminishing returns. This means that as more capital (e.g., machinery, tools, infrastructure) is added to a fixed amount of labor, the additional output generated by each new unit of capital decreases over time. In simpler terms, if a company keeps adding more machines but does not increase its workforce or improve its technology, productivity gains will eventually slow down. This principle is a key assumption in the neoclassical growth model, which explains why continuous investment in capital alone does not sustain long-term economic growth without technological innovation or human capital improvement. Hence, the correct answer to the second question is (A) diminishing returns.
Now, I’ll generate an image illustrating economic growth through education and capital investment.
Here is the generated image illustrating economic growth through education and capital investment. Let me know if you need any modifications or additional details!
