The slope of the production function reflects
A) capital expenditures.
B) government expenditures.
C) Constant returns to labor.
D) Increasing returns to labor.
E) Diminishing returns to labor.

Question

Quizplus · Accepted Answer

The slope of the production function reflects the change in output resulting from a change in labor input. If the increase in labor input leads to a proportionate increase in output, then the production function exhibits constant returns to labor, and the slope is constant. However, if the increase in labor input results in a less-than-proportionate increase in output, then the production function exhibits diminishing returns to labor, and the slope is decreasing. Therefore, the best choice is E, as it reflects the concept of diminishing returns to labor.

The Slope of the Production Function Reflects