The marginal product of capital diminishes with the addition of more and more capital.

Question

Quizplus · Accepted Answer

This is a well-established principle in economics known as the law of diminishing marginal returns, which states that as more units of one input (capital in this case) are added while holding other inputs constant, the additional output generated by each additional unit of the input will eventually decrease, ceteris paribus. This is due to the fact that the fixed inputs (such as labor or land) become the limiting factor in production, and the efficiency gains from additional capital become smaller and smaller over time.

The Marginal Product of Capital Diminishes with the Addition of More