When an additional unit of a variable input adds less to the 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

Diminishing marginal returns occur when the increase in the output of a good or service becomes smaller as one input is increased while other inputs are held constant. In other words, the marginal product of a variable input decreases after a certain point.

When an Additional Unit of a Variable Input Adds Less