When do diminishing marginal returns occur?
a
when additional workers will get in each other’s way
b
when some workers increase output but others decrease it
c
when additional workers increase total output at a decreasing rate
d
when extra workers will have to wait their turn to be productive
A new technology increases the speed of computers without increasing production costs. What is the MOST LIKELY effect of this technology?
a
The price of new computers will increase.
b
The demand for new computers will decline.
c
The price of new computers will decline.
d
The demand for new computers will increase.
A new technology increases the speed of computers without increasing production costs. What is the MOST LIKELY effect of this technology?
a
The price of new computers will increase.
b
The demand for new computers will decline.
c
The price of new computers will decline.
d
The demand for new computers will increase.
The Correct Answer and Explanation is :
Question 1: When do diminishing marginal returns occur?
Answer: c) when additional workers increase total output at a decreasing rate
Explanation:
Diminishing marginal returns refer to the point where, as more units of a variable input (like labor) are added to a fixed input (such as capital or equipment), the additional output produced by each new worker starts to decrease. Initially, adding more workers increases total output, but eventually, as the number of workers increases, the output produced by each additional worker begins to decrease. This phenomenon occurs because, with a fixed amount of capital, workers have less equipment to work with, and they might begin to crowd each other, reducing efficiency.
At the point of diminishing marginal returns, the total output still increases, but at a slower rate. This is why the correct answer is option (c). The key concept is that while output is still increasing, the rate of increase slows down as more workers are added. This principle is crucial for businesses to understand, as it helps them determine the optimal number of workers to employ for maximum efficiency and output.
Question 2: A new technology increases the speed of computers without increasing production costs. What is the MOST LIKELY effect of this technology?
Answer: c) The price of new computers will decline.
Explanation:
When new technology increases the speed of computers without increasing production costs, it allows manufacturers to produce computers more efficiently, increasing productivity. The increased efficiency often leads to a decrease in production costs per unit. As a result, companies may lower the prices of computers to remain competitive in the market, attract more customers, and capitalize on the improved technology.
Lower production costs also allow manufacturers to maintain or increase their profit margins even with lower prices. Additionally, if the technology is widely adopted, it can push the industry as a whole toward lower prices. The correct answer is option (c) because the price of new computers is likely to decrease as a result of the technological improvement that allows production to be more efficient and cost-effective.
In contrast, answers (a) and (b) are less likely because increased speed and efficiency typically make computers more affordable, not more expensive or less in demand. The demand for computers (option d) might indeed increase because of the improved technology, but the price decline is a more direct and likely effect of lower production costs.