Question

If the slope of a graphed function never increases but sometimes decreases, the function displays which of the following?

1) Increasing marginal returns.
2) Decreasing marginal returns.
3) Either increasing or decreasing marginal returns may have this form.

Answer 1

The function with a slope that never increases but sometimes decreases displays decreasing marginal returns, indicative of a negative relationship between variables in economics, such as efficiency in production diminishing as input increases.

Step-by-step explanation:

If the slope of a graphed function never increases but sometimes decreases, the function displays decreasing marginal returns. In economics, a function with a slope that decreases but never increases is indicative of diminishing marginal returns. That is, as the production levels increase, the additional output derived from each additional unit of input decreases.

A graph that is downward-sloping signifies a negative relationship between two variables. If we consider output levels and the associated marginal returns, initial positive or increasing marginal returns might be represented by a flat or upward-sloping segment at low levels of output. However, as output increases, diminishing marginal returns set in, leading to a downward-sloping curve as is described in the question.

The interpretation of slope in economics is critical since it represents the relationship between variables such as price and quantity or consumption and income. When the slope decreases, the curve becomes flatter which, in the context of production, may suggest a reduction in efficiency as additional units of input contribute less and less to the total output. Therefore, the correct answer is that the function displays decreasing marginal returns.