When an additional unit of a variable input adds less to total product than the previous unit,the firm has:
A)increasing returns.
B)diminishing marginal returns.
C)diminishing total returns.
D)diminishing marginal returns and diminishing total returns.

Question

Quizplus · Accepted Answer

This is the definition of diminishing marginal returns where each additional unit of a variable input adds less to total product than the previous unit. Choice A, "increasing returns," is the opposite of this situation where each additional unit of a variable input adds more to total product than the previous unit. Choice C, "diminishing total returns," is not a commonly used term in economics and is not a relevant concept in this situation. Choice D, "diminishing marginal returns and diminishing total returns," is incorrect because while diminishing marginal returns is present, there is no indication of diminishing total returns.

When an Additional Unit of a Variable Input Adds Less