The production function is concave in capital because
A) the contribution to production of each additional unit of capital decreases.
B) the marginal product of capital is increasing.
C) the marginal product of labor is decreasing.
D) the cost of loans increases with their quantity.

Question

Quizplus · Accepted Answer

Concavity implies that the marginal product of capital decreases as more capital is added, which corresponds to option A. Option B is incorrect because increasing marginal product would imply convexity. Option C is unrelated to the question of concavity in capital. Option D is also unrelated and discusses the cost of loans, not the production function.

The Production Function Is Concave in Capital Because