Question

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 _________.a. Productivity will definitely fall.

b. Productivity will definitely be unchanged.
c. Productivity will definitely rise.
d. None of the above are necessarily correct.

Answer 1

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 None of the above are necessary correct because when capital increases more than labor it is possible for the productivity to remain unchanged, and it is also possible for the productivity to increase by small margin.

But at a point where both capital and labor are increased in the same vane then definitely productivity will increase.

Step-by-step explanation:

Capital:this is a term used to refer financial assets.

Labor: this refers to physical work

productivity: This is the efficiency of production.