Factors of production (3)

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1.

Question 2: Explain the concept of diminishing returns to capital. How does this concept relate to the optimal levels of investment in human and physical capital? Consider the potential for economies of scale.

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Question 3: Using a table, compare and contrast the benefits and drawbacks of investing in human capital versus physical capital. Consider the time horizons for these investments and the potential for externalities.

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Question 3

The debate surrounding the division of labour has existed since the time of Adam Smith. Discuss the extent to which the division of labour benefits society as a whole, considering both the potential advantages and disadvantages.