Which of the following will occur when the capital stock increases?
A) There will be no change in profit per unit of capital.
B) Profit per unit of capital will decrease.
C) Profit per unit of capital will increase.
D) Profit per unit of capital initially increases followed by decreases.
E) There will be an ambiguous effect on profit per unit of capital.

Question

Quizplus · Accepted Answer

When the capital stock increases, it typically leads to a decrease in profit per unit of capital due to the diminishing returns to capital. This means that as more capital is added, the additional output produced from the last unit of capital decreases, leading to lower profits per unit of capital.

Which of the Following Will Occur When the Capital Stock