Question

Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate. rev: 05_30_2018 Multiple Choice
A. increase.
B. increasing decrease.
C. decreasing increase.
D. constant increase.
E. decreasing.

Answer 1

Answer:

The correct answer that fills the gaps are: A. increase; E. decreasing.

Explanation:

The Law of diminishing returns has a fundamental role in the productivity of a factor, since it indicates that the marginal productivity of each factor decreases as more units of it are added to the production process (leaving the rest of the productive factors in a constant amount). In this way exceeding the optimum amount of a productive factor can even result in a decrease in total productivity.

It is necessary to explain the basic concept of diminishing marginal returns. If we increase the quantity of a productive factor and leave the amount used of the rest fixed, there will come a time when the quantity of final product we obtain is less as we produce more and more. There may even come a time when, by increasing a unit of factor employed (for example, work or machinery), production decreases.

Explained in simple words, it seems that despite what may be thought a priori, increasing a factor not only does not increase the production of the good or service but can lead to a gradual decrease in the amount produced.

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