Question

If increasing physical capital increases productivity, why would a company not buy newer, faster computers for all its workers every year?

Answer 1

Answer: it would be too large of an unnecessary expense

There are different resources or factors of production needed by the company. Human capital and physical capital like faster computers are some of them. Buying new computers for all workers will really increase productivity but it would be too large of an unnecessary expense if their specific jobs do not require them and also computers become obsolete in 3 years time.

Answer 2

The reasons it would not be wise to buy computers every year are:

• Diminishing returns.
• High expenses.

What would buying new computers lead to?

The company would incur a huge expense every year which could have been avoided if computers are replaced less regularly.

Diminishing returns might also set in as more computers lead to less marginal returns.

In conclusion, this would not be a wise move.

Find out more on marginal returns at https://brainly.com/question/13923885.