Diminishing returns to capital means that as you add more capital:
A) output falls.
B) the additional contribution to output eventually declines.
C) labor usage falls.
D) output rises.

Question

Quizplus · Accepted Answer

When you add more capital, the additional contribution to output eventually declines, leading to diminishing returns to capital. This occurs because there is a limited amount of complementary inputs, such as labor or technology, to combine with capital. Therefore, each additional unit of capital has a smaller impact on output than the previous units, resulting in diminishing returns.

Diminishing Returns to Capital Means That as You Add More