Consider an Aggregate Production Function Y = F(K, L)that Displays

question 21

Multiple Choice

Consider an aggregate production function Y = F(K, L) that displays diminishing marginal returns to labour. If the amount of capital is held constant and the amount of labour used in production is increasing, then

• A)there are constant returns to scale.
• B)each additional unit of labour will add more to total output than the previous unit of labour.
• C)there are increasing returns to scale.
• D)each additional unit of labour will add less to total output than the previous unit of labour.
• E)total output increases in proportion to the increases in labour.

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Definitions:

Tariff

A tariff is a tax imposed by a government on goods and services imported from other countries, used to regulate trade, protect domestic industries, or generate revenue.

Welfare Loss

The decrease in social welfare, usually measured in terms of lost economic efficiency or satisfaction, due to factors like taxes or monopolies.

Import Quota

A restriction imposed by a government on the quantity of a specific good that can be imported into a country during a specified time period.

Domestic Production

Domestic production denotes the total output of goods and services produced within a country's borders, reflecting the overall productive capacity and economic health of the nation.