The transformation curve or production function:
A) Rises from the left to the right.
B) Assumes that the more is invested, the more will be the resulting future output.
C) Assumes decreasing returns to scale.
D) Has a slope, which measures the marginal productivity of capital.
E) All of the above.

Question

Quizplus · Accepted Answer

The transformation curve or production function typically embodies all these characteristics: it often rises from left to right, indicating that as more is invested (in terms of capital, labor, or technology), the output increases; it assumes that more investment leads to more future output; it often incorporates the concept of decreasing returns to scale, meaning that as more inputs are used, the additional output generated from those inputs decreases; and its slope can represent the marginal productivity of capital, showing how additional units of capital will affect output.

The Transformation Curve or Production Function