All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,
A)the increase in output was greater for this year than last year.
B)the increase in output was greater last year than this year.
C)the increase in output is the same in both years.
D)None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

If there are diminishing returns, then the increase in output decreases with each additional unit of capital. Therefore, the increase in output will be greater when capital is first increased. Since the country raised its capital by 100 units last year, the increase in output was greater then when compared to raising it by another 100 units this year, which would experience the impact of diminishing returns.

All Else Equal,if There Are Diminishing Returns,then If a Country