To a firm facing constant input prices, increasing marginal returns
A)means that each additional unit of output costs more to produce than the previous unit
B)means that the marginal product of the variable input decreases as more of the input is used
C)can occur due to specialization and division of labor
D)usually occur at very high rates of output
E)can never occur

Question

Quizplus · Accepted Answer

Increasing marginal returns occur when the marginal product of the variable input (usually labor) increases as more of the input is used. This can occur due to specialization and division of labor, as workers become more efficient at their specialized tasks. It is not related to input prices, and can occur at any level of output, but is more common at lower levels of output.

To a Firm Facing Constant Input Prices, Increasing Marginal Returns