All other things equal, increases in capital will cause output to
A) increase at an increasing rate.
B) increase at a constant rate.
C) increase at a decreasing rate.
D) remain constant.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as more units of a variable input (in this case, capital) are added to a fixed input (such as labor), the output will eventually increase at a decreasing rate. Therefore, increases in capital will cause output to increase at a decreasing rate.

All Other Things Equal, Increases in Capital Will Cause Output