Outputs and Cost; Diminishing Marginal Returns According to the law of diminishi

Question

Outputs and Cost; Diminishing Marginal Returns

According to the law of diminishing marginal returns, which of the following is true?

A. Marginal cost eventually decreases as more and more of a variable input is increased

B. Marginal cost eventually decreases at a diminishing rate as more and more of a variable input increased

C. Marginal cost eventually increases as more and more of a variable input is increased

D. Marginal product eventually increases at a constant rate as more of a variable input is increased

E. Marginal product eventually increases at a diminishing rate as more and more of a variable input is increased

Explanation / Answer

Ans E

Diminishing Returns occurs in the short run when one factor is fixed. If the variable factor of production is increased, there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average product

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