Diminishing Returns to Physical Capital Implies That, When the Human

question 143

Multiple Choice

Diminishing returns to physical capital implies that, when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _____ productivity.

• A) a smaller increase in
• B) a larger increase in
• C) a decrease in
• D) negative

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Definitions:

Marginal Cost

The supplementary cost associated with manufacturing one more unit of a good or service.

Decreasing Its Output

A strategy or condition where a firm reduces the quantity of goods or services it produces, often in response to lower demand or to increase prices.

Marginal Revenue

Marginal revenue is the additional income generated from selling one more unit of a good or service, critical for determining the optimal level of output for profit maximization.

Marginal Cost

The incremental cost of producing an additional unit of a good or service.