Asked by Jenna Hallett on May 10, 2024
Verified
The situation pictured in Figure 6.4.3 above:
A) is one of increasing marginal returns to labor.
B) is one of increasing marginal returns to capital.
C) is not consistent with diminishing marginal product of labor or capital.
D) shows constant returns to scale.
E) shows diminishing marginal products of labor and capital.
Marginal Returns
The additional output gained by employing an additional unit of a resource.
Labor
The measure of the work done by human beings in the economy, often referred to in terms of hours worked or total workforce.
Capital
Refers to the financial assets or resources that businesses use to fund their operations and grow, including cash, equipment, and buildings.
- Develop correlations between the angle of isoquants, incremental outputs of factors, and the law of diminishing marginal gains.
Verified Answer
SS
Svitlana SoltysMay 17, 2024
Final Answer :
E
Explanation :
The situation described as showing diminishing marginal products of labor and capital implies that as more units of labor or capital are added, the additional output produced by each new unit decreases. This is a common occurrence in production processes where, after a certain point, adding more of a factor of production (like labor or capital) results in smaller increases in output, reflecting diminishing marginal productivity.
Learning Objectives
- Develop correlations between the angle of isoquants, incremental outputs of factors, and the law of diminishing marginal gains.