Assume That There Are Decreasing Returns to Capital, Decreasing Returns

question 26

Multiple Choice

Assume that there are decreasing returns to capital, decreasing returns to labour, and constant returns to scale. An increase in the capital stock will cause which of the following?

• A) Decrease the capital- labour ratio.
• B) An increase in output per capita.
• C) No change in output.
• D) Output to increase, but by more and more as the capital stock increases.
• E) A decrease in output.

---

Definitions:

Alveolar Duct

Tiny ducts in the lungs that connect the respiratory bronchioles and alveolar sacs, a key part in the pathway of air to the alveoli.

Primary Bronchus

One of the two main branches of the trachea that convey air into the lungs.

Respiratory Bronchiole

The very small airways in the lungs where gas exchange between air and blood takes place, part of the respiratory zone.

Terminal Bronchiole

The smallest airways in the lungs, located at the end of the bronchiole tree, not directly involved in gas exchange.