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Multiple Choice Questions The concept of diminishing marginal returns implies that Select one: O a

Economics Nov 28, 2020

Multiple Choice Questions The concept of diminishing marginal returns implies that Select one: O a. output increases but at a decreasing rate as the amount of labor is increased and the amount of capital remains fixed O b. output cannot decrease as long as labor is substituted for capital O c. output decreases if either labor or capital is decreased O d. output increases but only if the amounts of both labor and capital increase O e. if the capital stock is kept constant, output cannot increase even if more labor is available

Expert Solution

Answer - (a) output increases but at a decreasing rate as the amount of labor is increased and amount of capital remains constant ; as for the Diminishing Marginal returns it states that with additional unit of one factor i.e. labor keeping capital unchanged the overall output may increase but the marginal output or increamental output per unit tend to decrease.

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