-Refer to Exhibit 17-2.Assume that the starting point is always point 1.Which of the production function graphs shown,(a)or (b),represents an increase in the quantity of labor,and which represents an increase in the quantity of capital,respectively?
A) (a); (a)
B) (b); (a)
C) (a); (b)
D) (b); (b)

Question

-Refer to Exhibit 17-2.Assume that the starting point is always point 1.Which of the production function graphs shown,(a)or (b),represents an increase in the quantity of labor,and which represents an increase in the quantity of capital,respectively?
A) (a); (a) 
B) (b); (a) 
C) (a); (b) 
D) (b); (b)

Quizplus · Accepted Answer

In the production function graph (a), as more labor is added, output increases at a decreasing rate, indicating diminishing marginal returns to labor. This is consistent with an increase in the quantity of labor. 
In the production function graph (b), as more capital is added, output increases at an increasing rate, indicating increasing marginal returns to capital. This is consistent with an increase in the quantity of capital.