Diminishing marginal returns occur when:
A) each additional unit of a variable factor adds more to the total output than the previous unit.
B) each additional unit of a variable factor adds less to the total output than the previous unit.
C) the marginal product of a variable factor is increasing at a decreasing rate.
D) the total product decreases.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occur when each additional unit of a variable factor adds less to the total output than the previous unit. This is because as more and more units of the variable factor are added, the fixed factors (such as land or capital) become increasingly scarce, thereby reducing the productivity of the additional units of the variable factor.

Diminishing Marginal Returns Occur When