Question

1. Which of the following statements is consistent with the fact that capital in an economy is subject to diminishing returns?
   1. When workers have a relatively small quantity of capital, giving them an additional unit of capital increases their productivity by a relatively large amount
   2. When workers have a relatively large quantity of capital, giving them an additional unit of capital increases their productivity by a large amount
   3. When workers have a relatively small quantity of capital, giving them an additional unit of capital will not increase their productivity
   4. When workers already have a large quantity of capital, giving them an additional unit of capital will not increase productivity

My answer is D since it asks "diminishing returns" but that not correct.

Can you give me the right option and explain it?

Answer 1

"A"

When workers have a relatively small quantity of capital, giving them an additional unit of capital increases their productivity by a relatively large amount. Diminishing marginal return first increases the output by a larger amount and then it goes on decreasing when we add more of one resources without increasing the other. option D is wrong because it says that it will not increases productivity, it will but in much less proportion.