The short-run aggregate production function is subject to ________ if capital stock is increased,holding the total efficiency units of labor constant.
A) the Law of Diminishing Marginal Product
B) decreasing opportunity cost of production
C) increasing opportunity cost of production
D) increasing returns to scale

Question

Quizplus · Accepted Answer

The Law of Diminishing Marginal Product states that as we increase one factor of production (capital stock) and holding other factors of production constant (total efficiency units of labor), the marginal product of the variable input (capital stock) will eventually decrease, leading to diminishing marginal returns. Therefore, the short-run aggregate production function is subject to the Law of Diminishing Marginal Product if capital stock is increased, holding the total efficiency units of labor constant. The other choices are not applicable in this scenario.

The Short-Run Aggregate Production Function Is Subject to ________ If