Diminishing marginal returns occur when A

Economics Dec 15, 2020

Diminishing marginal returns occur when

A. all inputs are increased and output decreases.

B. all inputs are increased and output increases by a smaller proportion.

C. a variable unit is increased and its marginal product falls.

D. a variable input is increased and output decreases.

Expert Solution

Answer: C

Diminish marginal returns occur when a variable input is increased and marginal product falls. This is different than increasing all inputs because doubling all inputs will likely double output assuming inputs are homogeneous. In the short-run though there are fixed costs and thus increasing variable costs such as labor while holding land constant will eventually see the marginal product of labor fall due to space restrictions.

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