Answer to Question #228761 in Microeconomics for Musawwir

Question

A firm uses Labour (L) and Capital (K) to produce commodity (Y). The quantities of the inputs and

outputs are shown in the table below.

L 0 1 2 3 4 5 6 7 8 9 10

K 90 90 90 90 90 90 90 90 90 90 90

Y 0 100 250 420 560 675 760 820 860 885 900

Answer 1

From the given data, labor produce of the commodity increase with increase in labor, capital kept constant. Here we can say law of diminishing returns is demonstrated. The law states that adding an additional factor of production results in smaller increases in output when one variable is kept constant.