Suppose that the return to investment is given by the slope of the standard diminishing returns production function that relates the level of output, Y, to the stock of capital, K. In this case, all other things equal the slope of the production function is steeper the smaller is:

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In the context of a standard diminishing returns production function, the return to investment (measured by the slope of the production function) is higher when the stock of capital, K, is smaller. This is because, with less capital, each additional unit of capital tends to be more productive, leading to a steeper slope. This principle reflects the law of diminishing returns, where the marginal product of capital decreases as the amount of capital increases.

Suppose That the Return to Investment Is Given by the Slope