Exhibit 8.3

-Refer to Exhibit 8.3, which shows a per-worker production function. The bowed shape of the per-worker production function illustrates the law of diminishing returns to scale.

Question

Exhibit 8.3
 
-Refer to Exhibit 8.3, which shows a per-worker production function. The bowed shape of the per-worker production function illustrates the law of diminishing returns to scale.

Quizplus · Accepted Answer

The bowed shape of the per-worker production function illustrates the law of diminishing marginal returns, not diminishing returns to scale. This law states that as more of a variable input (like labor) is added to a fixed amount of another input (like capital), the additional output produced from each additional unit of the variable input will eventually decrease.

Exhibit 8.3 -Refer to Exhibit 8.3, Which Shows a Per-Worker Production Function