If a firm is experiencing diminishing marginal returns,
A)total output decreases as all resources are increased
B)total output decreases as all resources are decreased
C)total output decreases as one variable resource is increased, other things constant
D)additional increments of output diminish as one variable resource is increased, other things constant
E)additional increments of output diminish as all variable resources are increased

Question

Quizplus · Accepted Answer

Diminishing marginal returns imply that the additional units of output from increasing one variable input are diminishing, while keeping other factors constant. Therefore, choice D is the best option because it states that the additional increments of output diminish as one variable resource is increased, while other things are held constant, which is the definition of diminishing marginal returns.

If a Firm Is Experiencing Diminishing Marginal Returns