Indeed, for , the general CES function given by Equation 1 simplifies to and the Schumpeterian theories of endogenous growth have, to some extent, also been motivated by diminishing returns to R&D by assuming that innovations are spread over a larger variety of products and, therefore, that there is a tendency for decreasing returns to … Still have questions? Productivity will definitely be unchanged. Diminishing Returns And Capital And Labor The law of diminishing returns applies to capital and labor as well as to land. True… Favourite answer. Type of paper. QUESTION 1 1 points Save Answer If there are diminishing returns to capital, then o a capital produces fewer goods as it ages. Productivity will definitely rise.d. 4. increases in the capital stock eventually decrease output. Favorite Answer. In our initial example, the factory has four machines. Only authorized users can leave an answer! b. If when the plant is undermanned the amount of labor is gradually increased, for a time the product will be increased per unit of labor applied to the capital. To illustrate its application to capital, a fixed quantity of capital invested in a manufacturing plant may be considered. To capture this possibility, growth is often modeled as a quadratic function of aid relative to GDP. d. increases in the capital stock increase output by ever smaller amounts. Similarly, if the third kilogram produces only ¼ ton, then the MC equals $1 per quarter ton, or $4 per ton. In other words, adding extra amounts of capital gives progressively smaller and smaller This principle teaches managers to be aware that if they want to achieve total … a.increases in the capital stock increase output by ever smaller amounts. If there are no other changes, then if the second kilogram of seeds applied to land produces only half the output of the first (showing diminishing returns), the marginal cost would equal $1 per half ton of output, or $2 per ton, and the average cost is $2 per 3/2 tons of output, or $4/3 per ton of output. labour), there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average product. Get your answers by asking now. Schumpeterian theories of endogenous growth have, to some extent, also been motivated by diminishing returns to R&D by assuming that innovations are spread over a larger variety of products and, therefore, that there is a tendency for decreasing returns to … Answer and Explanation: The right answer choice is c. If both capital and labor increase, productivity will definitely rise. But after the point is reached where the plant is fully manned, a … Get answers by asking now. Describe the two major affective disorders, the heritability of these diseases, and their… Suppose your dorm is 3.66m wide by 3.66m long by 2.71m high and has an air conditioner that… Place your order. Having 1 machine, we can produce 50 pizzas. c. increases in the capital stock eventually d. increases in the capital stock increase output decrease output. All else equal, if there are diminishing returns and constant returns to scale, then what happens to productivity if capital and labor both increase but capital increases by more? diminishing returns, and then to use technology as an explanatory variable when the other concepts are seen to not have sufficient explanatory power. In addition, with the help of graph of law of diminishing returns, it becomes easy to analyze capital-labor ratio. Get help with your Diminishing returns homework. b.capital produces fewer goods as it ages. The Law of Diminishing Marginal Product (more often called, The Law of Diminishing Marginal Returns) states that with a fixed factor, more and more variable inputs applied to production will eventually result in less and less additional output. Thus, the law applies to intensive cultivation. None of the above are necessarily correct. If there are no other changes, then if the second kilogram of seeds applied to land produces only half the output of the first, the MC equals $1 per half ton of output, or $2 per ton. This law is also called the principle of diminishing marginal productivity. This law is also called the principle of diminishing marginal productivity. Answer Save. Decreasing then increasing marginal cost, reflected by a U-shaped marginal cost curve, is the result of increasing then decreasing marginal returns. labour), there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average product. but the thing is that sooner or later its all got to come to a head. Why don't most people live the traditional life of getting married, having 3 children and a house in the suburbs by age 30 anymore? Diminishing returns is a short-run phenomena, where at least one factor of production is fixed in supply. approaches 1, diminishing marginal returns to labor and capital break down. a. 1. This principle teaches managers to be aware that if they want to achieve total … b)the average product of labour always exceeds the marginal product of labour. If there are diminishing returns to capital, then a. capital produces fewer goods as it ages. Lv 6. Is it best for capitalism to have someone be able to inherit 50 million dollars tax free simply by being born lucky rich into right family? If there are diminishing returns to capital, then 1. capital produces fewer goods as it ages. Indeed, for , the general CES function given by Equation 1 simplifies to and the There are several factors that are responsible for the application of these laws. Thus, diminishing marginal returns imply increasing marginal costs. Answer Save. They are often characterized by sustained rapid economic growth for over three decades (OECD, 1979; Page, 1994; World Bank, 1993; Park and Park, 1989). by ever smaller amounts. 8 years ago. Note: the textbook definition: If a firm increases output by adding variable labour to fixed capital then eventually diminishing marginal returns (physical product of labour) will set in. But if, on the other hand, the farmer brings more and more land under cultivation, even then the returns will decrease. c. Productivity will definitely rise. a)the marginal product of labour is increasing. This note articulates the opposite view: most evidence suggests diminishing returns powerful enough that further capital accumulation will cause a decline in net capital in-come, rather than an expansion. labor) are being increased, a point is reached when the additional inputs yield smaller output or diminishing returns relative to the increasing inputs. There is conjecture that political instability (5), poor government decisions (4, 5 ), and epidemics such as AIDS (6, 7) may be responsible for some of the exceptional failures to bring down high rates of infant mortality. 20. O b. old ideas are not as useful as new ones O c. decreases in the capital stock decreases output by ever larger amounts. Can you explain why exports>imports is net capital outflow? In industries, the various factors of production can be co-operated, up to a certain point. There are some assumptions for the law of diminishing returns to a factor to be valid. Diminishing returns are due to the disruption of the entire productive process as additional units of labor are added to a fixed amount of capital. Don’t savings increase when interest rate is higher? In agriculture, the law of diminishing returns sets in at an early stage because one very important factor, i.e., land is a constant factor there and it cannot be increased in right proportion with other variable factors, i.e., labor and capital. I feel that it won't be good. Relevance. diminishing returns, and then to use technology as an explanatory variable when the other concepts are seen to not have sufficient explanatory power. c)the marginal product of labour can be positive or negative. 1. Thus, diminishing marginal returns imply increasing marginal costs. Then what do you think will happen. Solution for If there are diminishing returns to labor, then as more workers are hired the total amount produced by all of the workers will decrease. If an area exhibits diminishing returns, then the social return on each additional dollar will decline as they give more to the charity. Anonymous. Similarly, if the third kilogram produces only ¼ ton, then the MC equals $1 per quarter ton, or $4 per ton. approaches 1, diminishing marginal returns to labor and capital break down. The monetary difference between giving nothing and giving $500,000 is obviously the same as the monetary difference between giving $4.5m and giving $5m. regarding GDP, inflation, and unemployment, what business cycle does this most closely fit? Productivity will definitely be unchanged.c. Should we put an end to people who can't find a partner. 2 Answers. However, the model also assumes there are diminishing marginal returns to capital accumula-tion. 8 years ago. There is a great deal at stake here, which makes some of the current treatments of heterogeneity look disconcertingly simplistic. 10) All else equal, if there are diminishing returns to labor and diminishing returns to capital, then what If there are diminishing returns to labour when capital is fixed,then? In industries, the various factors of production can be co-operated, up to a certain point. Answer. How many hours a day do you use your Personal Computer- PC ( Phablet PC , Tablet PC or Laptop/Desktop PC)? QUESTION 1 1 points Save Answer If there are diminishing returns to capital, then o a capital produces fewer goods as it ages. d.increases in the capital stock eventually decrease output. All else equal, if there are diminishing returns and constant returns to scale, then what happens to productivity if capital and labor both increase but capital increases by more? Does deficit finance always lead to inflation? Academic level. To illustrate its application to capital, a fixed quantity of capital invested in a manufacturing plant may be considered. depends upon capital and labour inputs as well as a technological e ciency parameter, A. Y t= AF(K t;L t)(1) It is assumed that adding capital and labour raises output @Y t @K t > 0(2) @Y t @L t > 0(3) However, the model also assumes there are diminishing marginal returns to capital accumula-tion. Relevance. The law of diminishing returns operates in both cases lf more and more labour and capital are applied to the same piece of land, the return per dose diminishes after some time. human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country’s long‐run economic success. These are: The technique of production does not change – If a producer is using the capital intensive technique, then it will remain the same, and it will not change to labor-intensive technique during the production process. There are a great deal of studies on the four Asian NIEs (hereafter NIEs) - South Korea, Taiwan, Hong Kong, and Singapore in recent years. Favorite Answer. Only authorized users can leave an answer! Red Fluffy Panda . ? Still have questions? b.capital produces fewer goods as it ages. d. None of the above are necessarily correct. True… Diminishing Returns. Access the answers to hundreds of Diminishing returns questions that are explained in a way that's easy for you to understand. For instance, lets say we have a pizza store. c. 0 0. By adding the 2nd machine, pizza numbers increase to, lets say, 90. capital) If the variable factor of production is increased (e.g. Continue to order Get a quote. What’s the difference between money and wealth ? Favorite Answer. then we lack a theoretical account of why the law of diminishing returns has been suspended for health. Diminishing return does not talk about good getting old. "all else equal, if there are diminishing returns and constant returns to scale, then what happens to productivity if capital and labor both increase but capital increases by more?" Answer Save. The law of diminishing returns operates in both cases lf more and more labour and capital are applied to the same piece of land, the return per dose diminishes after some time. "all else equal, if there are diminishing returns and constant returns to scale, then what happens to productivity if capital and labor both increase but capital increases by more?" 9 years ago. Diminishing Returns. For example, if the production function is Q=3K+2L (where K represents units of capital and L represents units of labor), then the marginal product of capital is simply three; every additional unit of capital will produce an additional three units of output. Is it possible to maintain a sustained long-run growth despite diminishing returns to capital? Answers. In other words, at some point an extra worker will add less output to the grand total than the previous worker. There is conjecture that political instability (5), poor government decisions (4, 5 ), and epidemics such as AIDS (6, 7) may be responsible for some of the exceptional failures to bring down high rates of infant mortality. The law of diminishing returns remains an important consideration in farming. Less number of labor lead to unutilized capital, because capital is indivisible. They are 1 ) increasing the production by keeping some factors constant while changing the other factors 2) Increasing the production by increasing all the factors. d.increases in the capital stock eventually decrease output. Thus, the law applies to intensive cultivation. In Economics, the law of diminishing returns holds that if one input is held constant (capital) while other inputs ( e.g. Post navigation. 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