The following figure shows two aggregate production functions.

-Refer to the figure above.At point B of aggregate production function 2,a one unit increase in the physical capital stock will lead to a ________.
A) one unit increase in aggregate production
B) one unit increase in aggregate production if the human capital stock also increases by one unit
C) less than one unit increase in aggregate production
D) more than one unit increase in aggregate production

Question

The following figure shows two aggregate production functions.
 
-Refer to the figure above.At point B of aggregate production function 2,a one unit increase in the physical capital stock will lead to a ________.
A) one unit increase in aggregate production 
B) one unit increase in aggregate production if the human capital stock also increases by one unit 
C) less than one unit increase in aggregate production 
D) more than one unit increase in aggregate production

Quizplus · Accepted Answer

At point B of aggregate production function 2, the slope of the function is less steep than at point A, indicating diminishing marginal returns. Therefore, a one unit increase in physical capital stock will lead to a less than one unit increase in aggregate production.

The Following Figure Shows Two Aggregate Production Functions