Asked by Rohan Anand on Jul 21, 2024
Verified
Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because
A) the ability or quality of the variable inputs hired decreases as more of them are hired.
B) the firm must lower the price of its product when it produces more units of output.
C) the per unit cost it must pay for variable inputs increases as more inputs are hired.
D) as more variable inputs are hired, the amount of the fixed input per unit of variable input decreases.
Variable Inputs
Inputs whose quantities can be changed in the short term to adjust production levels, such as labor and raw materials.
Fixed Input
An input whose quantity does not change with the level of output in the short run.
- Acquire knowledge about the principle of diminishing incremental returns.
- Understand the implications of the law of diminishing returns on productivity and output.
Verified Answer
MS
MUHAMMAD SHEHARYAR PERVAIZJul 28, 2024
Final Answer :
D
Explanation :
Diminishing marginal returns occur because, as more variable inputs (like labor) are added to a fixed input (like machinery or land), each additional unit of the variable input has less of the fixed input to work with, leading to decreases in the marginal productivity of the variable input.
Learning Objectives
- Acquire knowledge about the principle of diminishing incremental returns.
- Understand the implications of the law of diminishing returns on productivity and output.