Asked by Jeremy Quinonez on Jul 14, 2024
Verified
The law of diminishing returns refers to diminishing:
A) total returns.
B) marginal returns.
C) average returns.
D) all of these.
Law of Diminishing Returns
An economic principle stating that if one input in the production of a product is increased while other inputs are held constant, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.
Marginal Returns
The additional output gained by adding one more unit of a specific input, assuming all other inputs remain constant.
Total Returns
The complete return on an investment over a given time period, including both capital gains and dividends or interest.
- Explain the law of diminishing returns and its impact on production.
Verified Answer
SJ
Sharon JiangJul 15, 2024
Final Answer :
B
Explanation :
The law of diminishing returns states that as more and more units of a variable input (such as labor) are added to a fixed input (such as capital), the marginal product of the variable input will eventually begin to decrease. This means that the additional output gained from each additional unit of input will start to decline, resulting in diminishing marginal returns. It does not necessarily apply to total or average returns.
Learning Objectives
- Explain the law of diminishing returns and its impact on production.