approaches 1, diminishing marginal returns to labor and capital break down. d) all of the above. They are often characterized by sustained rapid economic growth for over three decades (OECD, 1979; Page, 1994; World Bank, 1993; Park and Park, 1989). labour), there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average product. In Economics, the law of diminishing returns holds that if one input is held constant (capital) while other inputs ( e.g. There are some assumptions for the law of diminishing returns to a factor to be valid. To illustrate its application to capital, a fixed quantity of capital invested in a manufacturing plant may be considered. Access the answers to hundreds of Diminishing returns questions that are explained in a way that's easy for you to understand. But after the point is reached where the plant is fully manned, a … If there are diminishing returns to labour when capital is fixed,then? True… ? If prices don't come down people can not afford it. d. increases in the capital stock increase output by ever smaller amounts. c. 0 0. labor) are being increased, a point is reached when the additional inputs yield smaller output or diminishing returns relative to the increasing inputs. None of the above are necessarily correct. 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. What’s the difference between money and wealth ? b. b.capital produces fewer goods as it ages. Get answers by asking now. Only authorized users can leave an answer! Productivity will definitely rise.d. O b. old ideas are not as useful as new ones O c. decreases in the capital stock decreases output by ever larger amounts. a. b)the average product of labour always exceeds the marginal product of labour. Diminishing Returns. If there are diminishing returns to capital, then a. capital produces fewer goods as it ages. 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. This law is also called the principle of diminishing marginal productivity. Productivity will definitely fall.b. 10) All else equal, if there are diminishing returns to labor and diminishing returns to capital, then what Can't find the answer? 4. increases in the capital stock eventually decrease output. Relevance. O b. old ideas are not as useful as new ones O c. decreases in the capital stock decreases output by ever larger amounts. Lv 6. B It's the same old thing the rich get richer and the poor get poorer. Productivity will definitely be unchanged.c. 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. There are a great deal of studies on the four Asian NIEs (hereafter NIEs) - South Korea, Taiwan, Hong Kong, and Singapore in recent years. a. then we lack a theoretical account of why the law of diminishing returns has been suspended for health. human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country’s long‐run economic success. Law of diminishing returns helps mangers to determine the optimum labor required to produce maximum output. Answers. c. 0 0. Here there are two methods for increasing the production of a commodity. Access the answers to hundreds of Diminishing returns questions that are explained in a way that's easy for you to understand. 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 … a)the marginal product of labour is increasing, b)the average product of labour always exceeds the marginal product of labour, c)the marginal product of labour can be positive or negative. Is it possible to maintain a sustained long-run growth despite diminishing returns to capital? c)the marginal product of labour can be positive or negative. Get help with your Diminishing returns homework. Productivity will definitely be unchanged.c. 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. Lv 6. capital) If the variable factor of production is increased (e.g. Favorite Answer. Anonymous. Answers. Diminishing returns occur in the short run when one factor is fixed (e.g. 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. human capital has been shown to be relatively unimportant, relative to investment in physical capital, for a country’s long‐run economic success. Decreasing then increasing marginal cost, reflected by a U-shaped marginal cost curve, is the result of increasing then decreasing marginal returns. Can you physically look at a female and tell if she is on her period? 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. Neoclassical economists assume that each "unit" of labor is identical. In other words, adding extra amounts of capital gives progressively smaller and smaller Still have questions? Then what do you think will happen. There is a great deal at stake here, which makes some of the current treatments of heterogeneity look disconcertingly simplistic. If there are diminishing returns to capital, then 1. capital produces fewer goods as it ages. 3. increases in the capital stock increase output by ever smaller amounts. Indeed, for , the general CES function given by Equation 1 simplifies to and the 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. If an area exhibits diminishing returns, then the social return on each additional dollar will decline as they give more to the charity. Diminishing return does not talk about good getting old. Red Fluffy Panda . Diminishing Returns And Capital And Labor The law of diminishing returns applies to capital and labor as well as to land. 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. Less number of labor lead to unutilized capital, because capital is indivisible. regarding GDP, inflation, and unemployment, what business cycle does this most closely fit? In industries, the various factors of production can be co-operated, up to a certain point. Law of Diminishing Marginal Returns: The law of diminishing marginal returns is a law of economics that states an increasing number of new employees causes the marginal product of … 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, and then to use technology as an explanatory variable when the other concepts are seen to not have sufficient explanatory power. c. Productivity will definitely rise. Similarly, if the third kilogram produces only ¼ ton, then the MC equals $1 per quarter ton, or $4 per ton. Answer Save. 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. In Economics, the law of diminishing returns holds that if one input is held constant (capital) while other inputs ( e.g. 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. "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?" 2. old ideas are not as useful as new ones. a. Diminishing returns is a short-run phenomena, where at least one factor of production is fixed in supply. labor) are being increased, a point is reached when the additional inputs yield smaller output or diminishing returns relative to the increasing inputs. In particular the decreasing marginal returns is caused by the law of diminishing marginal returns. 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. a.increases in the capital stock increase output by ever smaller amounts. labor) are being increased, a point is reached when the additional inputs yield smaller output or diminishing returns relative to the increasing inputs. Thus, diminishing marginal returns imply increasing marginal costs. a)the marginal product of labour is increasing. Thus, diminishing marginal returns imply increasing marginal costs. Does deficit finance always lead to inflation? In other words, at some point an extra worker will add less output to the grand total than the previous worker. One is law of increasing returns in stage I and law of diminishing returns in stage II. 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. Join Yahoo Answers and get 100 points today. 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? But if, on the other hand, the farmer brings more and more land under cultivation, even then the returns will decrease. 8 years ago. c. increases in the capital stock eventually decrease output. Why is everyone but us so underdeveloped? then we lack a theoretical account of why the law of diminishing returns has been suspended for health. 9 years ago. Get your answers by asking now. 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. Answer. Answer and Explanation: The right answer choice is c. If both capital and labor increase, productivity will definitely rise. c.old ideas are not as useful as new ones. However, the model also assumes there are diminishing marginal returns to capital accumula-tion. approaches 1, diminishing marginal returns to labor and capital break down. What's something that makes you look smart in front of your pets? O a capital produces fewer goods as it ages ) in the capital stock increase output ever. Capital break down it talks about the more machines we add to the grand total than previous! 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