Scenario: Farm Country and Industry Country Are Two Neighboring Countries

Multiple Choice

Scenario: Farm Country and Industry Country are two neighboring countries. Both countries produce only one good: good X. Production in both countries is a function of total efficiency units of labor and physical capital stock.
-Refer to the scenario above.How will an increase in the physical capital stock affect output growth in these countries?

A) Output growth will decrease if the countries face diminishing marginal returns to physical capital.
B) Output growth will increase if the countries face constant returns to physical capital.
C) Output will decrease if the countries face diminishing marginal returns to physical capital.
D) Output will decrease if the countries face constant returns to physical capital.