Decreasing returns to capital (N)implies that a 4% increase in N will cause
A)Y to increase by more than 4%.
B)Y to increase by exactly 4%.
C)Y to increase by less than 4%.
D)no change in Y / N.

Question

Quizplus · Accepted Answer

Decreasing returns to capital mean that as more capital is added, the increase in output (Y) becomes less than proportional to the increase in capital (N). Therefore, a 4% increase in N will result in a smaller increase in Y, which is less than 4%. This is reflected in choice C.

Decreasing Returns to Capital (N)implies That a 4% Increase in N