The production function in the table below exhibits decreasing marginal returns to capital over what output range?
A) Between 0 and 1,524
B) Between 0 and 2,991
C) Between 2,391 and 3,048
D) Between 3,016 and 2,945

Question

The production function in the table below exhibits decreasing marginal returns to capital over what output range? 
A) Between 0 and 1,524 
B) Between 0 and 2,991 
C) Between 2,391 and 3,048 
D) Between 3,016 and 2,945

Quizplus · Accepted Answer

The production function exhibits decreasing marginal returns to capital when the marginal product of capital (change in output/change in capital) decreases as more capital is added while holding labor constant. Looking at the table, when capital increases from 4 to 5, output only increases from 900 to 960, which is an increase of only 60 units. This is a decreasing marginal product of capital. The same is seen when capital increases from 8 to 9, where output only increases by 40 units, indicating further decreasing marginal returns. These values fall within the range of 2,391 and 3,048, so the correct answer is C.

The Production Function in the Table Below Exhibits Decreasing Marginal