Diminishing Returns to Labor Means

question 45

Multiple Choice

Diminishing returns to labor means:

• A) that the marginal product of labor declines as the amount of labor used in a sector increases.
• B) that the marginal product of labor declines as the amount of capital combined with labor in a sector increases.
• C) that the marginal product of labor declines as the amount of land combined with labor in a sector increases.
• D) that the marginal product of capital declines as the amount of labor used in a sector increases.

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Definitions:

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Catch-Up Effect

The theory that poorer economies will tend to grow at faster rates than wealthier ones, allowing them to catch up in terms of income and other economic measures.

Capital

Refers to assets or resources that businesses or individuals use to generate wealth through investment.