The law of diminishing returns explains why
A)monopolies have a guaranteed profit margin
B)short-run MC and AVC curves are U-shaped
C)the production possibilities curve is bowed out
D)long run supply curves are downward sloping
E)total product is a straight line

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. This causes the short-run MC and AVC curves to be U-shaped as the marginal product of the variable input decreases and eventually becomes negative, leading to higher costs and diminishing returns.

The Law of Diminishing Returns Explains Why