Question

As the amount of capital per labour (or if you prefer, capital per worker) _________, output...

As the amount of capital per labour (or if you prefer, capital per worker) _________, output will increase at a diminishing rate.

increase

decrease

remains unchanged

None of the above are correct
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Answer #1

As more and more units of a factor added while keeping the amount of other factor constant the marginal productivity the factor increases at a diminishing rate. For example if we add more and more units of labour to a given amount of capital the marginal product of labour increase at a diminishing rate. On the other if we add more and more units of capital to a given amount of labour the marginal productivity of capital increase at a diminishing rate.

Answer: a. Increase.

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