Multiple Choice: The law of diminishing marginal returns: (a) does not hold when

Question

Multiple Choice:

The law of diminishing marginal returns:

(a) does not hold when the marginal product is always positive;

(b) has to hold when an additional unit of capital produces more extra output than an additional unit of labor;

(c) has to hold when increasing capital makes labor more productive;

(d) holds when the marginal product eventually becomes smaller.

With increasing returns to scale production, output q= f(K, L)

(a) more than doubles when you double labor input L;

(b) less than doubles when you triple all inputs;

(c) more than doubles when you double all inputs;

(d) at least triples if you double all inputs.

Explanation / Answer

Ans

1 D is right. Eventually marginal product falls

2 c is right. Here all factors are variable and output increases proportionately more than increase in inputs

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