2. old ideas are not as useful as new ones. Join Yahoo Answers and get 100 points today. 4. increases in the capital stock eventually decrease output. In industries, the various factors of production can be co-operated, up to a certain point. What's something that makes you look smart in front of your pets? Answer. O b. old ideas are not as useful as new ones O c. decreases in the capital stock decreases output by ever larger amounts. Is being a cashier a mindless and boring job? If there are diminishing returns to capital, then 1. capital produces fewer goods as it ages. To illustrate its application to capital, a fixed quantity of capital invested in a manufacturing plant may be considered. capital) If the variable factor of production is increased (e.g. Neoclassical economists assume that each "unit" of labor is identical. Diminishing marginal returns are an effect of increasing input in the short-run, while at least one production variable is kept constant, such as labor or capital. For example, if the production function is Q=3K+2L (where K represents units of capital and L represents units of labor), then the marginal product of capital is simply three; every additional unit of capital will produce an additional three units of output. Diminishing returns are due to the disruption of the entire productive process as additional units of labor are added to a fixed amount of capital. Is it possible to maintain a sustained long-run growth despite diminishing returns to capital? Answer. 1 Answer. Answer and Explanation: The right answer choice is c. If both capital and labor increase, productivity will definitely rise. There is conjecture that political instability (5), poor government decisions (4, 5 ), and epidemics such as AIDS (6, 7) may be responsible for some of the exceptional failures to bring down high rates of infant mortality. The monetary difference between giving nothing and giving $500,000 is obviously the same as the monetary difference between giving $4.5m and giving $5m. approaches 1, diminishing marginal returns to labor and capital break down. In particular the decreasing marginal returns is caused by the law of diminishing marginal returns. labour), there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average product. a.increases in the capital stock increase output by ever smaller amounts. Answer Save. This note articulates the opposite view: most evidence suggests diminishing returns powerful enough that further capital accumulation will cause a decline in net capital in-come, rather than an expansion. Among these factors, one of the most important factors for the law of increasing returns is fixed capital. None of the above are necessarily correct. Schumpeterian theories of endogenous growth have, to some extent, also been motivated by diminishing returns to R&D by assuming that innovations are spread over a larger variety of products and, therefore, that there is a tendency for decreasing returns to … 3. increases in the capital stock increase output by ever smaller amounts. c. 0 0. In other words, adding extra amounts of capital gives progressively smaller and smaller increases in output. Get help with your Diminishing returns homework. If there are no other changes, then if the second kilogram of seeds applied to land produces only half the output of the first (showing diminishing returns), the marginal cost would equal $1 per half ton of output, or $2 per ton, and the average cost is $2 per 3/2 tons of output, or $4/3 per ton of output. 1 Answer. c.old ideas are not as useful as new ones. In other words, adding extra amounts of capital gives progressively smaller and smaller If an area exhibits diminishing returns, then the social return on each additional dollar will decline as they give more to the charity. Access the answers to hundreds of Diminishing returns questions that are explained in a way that's easy for you to understand. Answer Save. a)the marginal product of labour is increasing. 20. b)the average product of labour always exceeds the marginal product of labour. Continue to order Get a quote. labor) are being increased, a point is reached when the additional inputs yield smaller output or diminishing returns relative to the increasing inputs. Productivity will definitely be unchanged.c. Can't find the answer? Favorite Answer. There are some assumptions for the law of diminishing returns to a factor to be valid. Only authorized users can leave an answer! . Similarly, if the third kilogram produces only ¼ ton, then the MC equals $1 per quarter ton, or $4 per ton. Explain why you believe this.? In industries, the various factors of production can be co-operated, up to a certain point. Indeed, for , the general CES function given by Equation 1 simplifies to and the If there are diminishing returns to capital, then a. capital produces fewer goods as it ages. then what's in the stores will go to waste. In agriculture, the law of diminishing returns sets in at an early stage because one very important factor, i.e., land is a constant factor there and it cannot be increased in right proportion with other variable factors, i.e., labor and capital. If prices don't come down people can not afford it. d. increases in the capital stock increase output by ever smaller amounts. Describe the two major affective disorders, the heritability of these diseases, and their… Suppose your dorm is 3.66m wide by 3.66m long by 2.71m high and has an air conditioner that… Place your order. This means the second derivative of output with respect to capital is negative. Relevance. I feel that it won't be good. This law is also called the principle of diminishing marginal productivity. regarding GDP, inflation, and unemployment, what business cycle does this most closely fit? How many hours a day do you use your Personal Computer- PC ( Phablet PC , Tablet PC or Laptop/Desktop PC)? 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