Question

The ________ in output due to each additional unit of a factor of production is ________ when other factors are held constant.

A) increase; smaller

B) increase; larger

C) decrease; smaller

D) decrease; larger

Answer 1

Option A.

• The increase in output due to each additional unit of a factor of production is smaller when other factors are held constant.
• This increase in output level due to the use of additional unit of a factor of production, when all the other factors are held constant is referred to as the marginal productivity.
• When we keep all the factors of productions that can contribute to the overall productivity as constant, the relative increase in output is smaller.
• This is because when the input doubles, the output also doubles, but if the other inputs are held constant the output may increase but in smaller amounts.