You have obtained the following information on country called “Utopia” for the year 2014:
Input name Real GDP per worker

$40,000 worth of physical capital
per worker $7000

$80,000 worth of physical capital
per worker $10,000

a. Draw a diagram showing the relationship that exists between physical capital per worker and real GDP per worker for Reenina.
b. Do you see “increasing returns to scale” in the data presented above?
c. Utopia’s neighboring country is called “Xinia”. Xinia has the same level of technology as Utopia. But when Xinia employs $40,000 worth of physical capital per worker, its real GDP per worker reaches $6000. When it employs $80,000 worth of physical capital per worker, its real GDP per worker reaches $8000. Why do you think this difference exists? What can be done in Xinia to address the issue?