As the quantity of capital increases, the marginal product of labour
A)is constant.
B)increases.
C)decreases.
D)may either increase or decrease.
E)gets more expensive.

Question

Quizplus · Accepted Answer

When the quantity of capital increases, it typically means that workers have more or better tools and machinery to work with, which generally increases their productivity. This is known as the principle of diminishing returns, where, in the short run, adding more of one factor of production (like capital) while keeping others constant (like labor) will at some point yield lower incremental per-unit returns. However, the initial effect of increasing capital is to make labor more productive, hence the marginal product of labor increases.

As the Quantity of Capital Increases, the Marginal Product of Labour