All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?
A)Output will rise by more than it did when the previous unit was added.
B)Output will fall by more than it did when the previous unit was added.
C)Output will rise but by less than it did when the previous unit was added.
D)Output will fall but by less then it did when the previous unit was added.

Question

Quizplus · Accepted Answer

Diminishing returns imply that as more units of a factor (in this case, capital) are added, the additional output (marginal product) generated by each new unit decreases. Therefore, if a country increases its capital by one unit, the output will rise but by less than it did for the previous unit added.

All Else Equal, If There Are Diminishing Returns, Then Which