Explanation

When moving along the efficient frontier from left to right (increasing risk), the relationship between risk and return is concave rather than linear. This means that:

1. Diminishing marginal returns to risk: Each additional unit of risk taken provides a smaller incremental increase in expected return compared to the previous unit of risk.

2. Efficient frontier shape: The efficient frontier is typically curved (concave) rather than a straight line. As you move to the right:

   • Initially, taking on small amounts of risk yields relatively large increases in expected return
   • As you take on more risk, the additional expected return per unit of risk decreases

3. Mathematical representation: The efficient frontier's concave shape can be represented by the Markowitz portfolio optimization model, where the risk-return tradeoff exhibits diminishing marginal returns.

4. Economic intuition: This makes sense because:

   • Low-risk portfolios can achieve meaningful diversification benefits
   • High-risk portfolios are already heavily concentrated in risky assets, so additional risk-taking provides less diversification benefit
   • Investors require increasingly higher compensation for taking on additional risk beyond certain levels

Therefore, option A is correct: "sequentially smaller increases in expected return." This reflects the concave nature of the efficient frontier where the risk-return tradeoff becomes less favorable as risk increases.