Using the Points on the Diagram Below, Identify Which Combinations

question 16

Essay

Using the points on the diagram below, identify which combinations of these points illustrate diminishing returns to capital.Give a brief explanation to support your answer. Alt text for Question 101: For question 101, a graph illustrating diminishing returns to capital
Long description for Question 101: The x-axis is labelled, capital per hour worked, K/L.The y-axis is labelled, real GDP per hour worked, Y/L.3 concave curves originating from 0 at the vertex are shown.5 points A ($50000, 15000), B (60000, 16000), C (70000, 16400), D (60000, $17000), and E (60000, 15000)are plotted.The curve labelled, Production function 1, passes through point E.The curve labelled, Production function 2, passes through points A, B, and C.The curve labelled, Production function 3, passes through point D.These 5 points are connected to their respective coordinates on the x and y-axis with dotted lines.

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Definitions:

Real Rate of Return

The rate of profit or loss on an investment after adjusting for inflation, providing a more accurate measure of purchasing power.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.

Interest Rate

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, over a specific period of time.

Investment Decision

The process of making choices about where to allocate limited resources or capital to generate the highest potential return.