When an economy faces diminishing returns,
A)the slope of the per-worker production function becomes steeper as capital per hour worked increases.
B)the slope of the per-worker production function becomes flatter as capital per hour worked increases.
C)the per-worker production function shifts to the left.
D)the per-worker production function shifts to the right.
E)the per-worker production function does not pass through the origin.

Question

Quizplus · Accepted Answer

Diminishing returns occur when adding more of a factor of production, such as capital, yields smaller and smaller increases in output. This means that as capital per hour worked increases, the additional output gained from each additional unit of capital decreases. Therefore, the slope of the per-worker production function becomes flatter as capital per hour worked increases.

When an Economy Faces Diminishing Returns