If a firm is experiencing diminishing returns,then:
A)the firm must be hiring less-qualified units of the variable resource.
B)the firm must be experiencing diseconomies of scale.
C)marginal physical product must be decreasing.
D)average physical product must be decreasing.
E)total physical product must be decreasing.

Question

Quizplus · Accepted Answer

Diminishing returns refers to a situation where each additional unit of the variable resource (such as labor or capital) leads to a relatively smaller increase in output. This means that the marginal physical product of the variable resource is decreasing. Option A is incorrect because the quality of the variable resource is not necessarily related to diminishing returns. Option B is incorrect because diseconomies of scale refer to a situation where the firm's long-run average total cost is increasing as the scale of production increases, which is different from diminishing returns. Option D is incorrect because average physical product refers to the output per unit of input, which may or may not be affected by diminishing returns. Option E is incorrect because total physical product refers to the total amount of output produced, which may or may not be affected by diminishing returns.

If a Firm Is Experiencing Diminishing Returns,then