QUESTION 4

Which of the following is an example of the law of diminishing marginal returns?

A.

Holding capital constant, when the amount of labor increases from 5 to 6, output increases from 20 to 25. Then when labor increases from 6 to 7, output increases from 25 to 28.

B.

Holding capital constant, when the amount of labor increases from 7 to 8, output increases from 36 to 42. Then when labor increases from 8 to 9, output increases from 42 to 50.

C.

When labor increases by 20 percent and capital decreases by 15 percent, output remains constant.

D.

When capital and labor both increase by 20 percent, output increases by only 15 percent.