When a firm produces a small amount of output,the spreading effect:
A)is stronger than the diminishing returns effect.
B)is weaker than the diminishing returns effect.
C)and the diminishing returns effect are equal.
D)is zero.

Question

Quizplus · Accepted Answer

When a firm produces a small amount of output, the marginal product of each additional unit of input is likely to be increasing. As a result, the spreading effect (increased output due to adding more inputs) is likely to be stronger than the diminishing returns effect (decreased output due to each additional input being less productive). Therefore, choice A is the best answer.

When a Firm Produces a Small Amount of Output,the Spreading