Figure 26-1

Refer to Figure 26-1. The curve becomes flatter as the amount of capital per worker increases because of

Question

Figure 26-1

Refer to Figure 26-1. The curve becomes flatter as the amount of capital per worker increases because of

BlackTom AI · Accepted Answer

When you look at the production function curve in Figure 26-1, the horizontal axis shows capital per worker and the vertical axis shows output per worker. As capital per worker rises, the curve rises but at a decreasing rate, which means each additional unit of capital adds less and less to output. This behavior is the essence of diminishing marginal returns to capital. 
Option 1: 'diminishing returns to capital.' This matches the idea that increasing capital per worker yields smaller increases in output per worker as you accumulate more capital. 
Option 2: 'increasing returns to labor.' The graph does not illustrate increasing output with respect to labor at an increasing rate; it shows a concave, diminishing marginal gain as capital per worker grows, not increasing returns to labor. 
Option 3: 'diminishing returns to labor.' The axis and the curve describe capital per worker, not labor per se; the concept of diminishing returns to labor would imply that adding more labor reduces output, which is not what this curve demonstrates. 
Option 4: 'increasing returns to capital.' The curve flattens as capital per worker increases, indicating that returns to capital are not increasing; they are diminishing. Therefore this option contradicts the shape of the curve.

2254 ECON 0110 SEC1300 Test 3

Figure 26-1 Refer to Figure 26-1. The curve becomes flatter as the amount of capital per worker increases because of

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