Table 2.4
-The firm depicted in Table 2.4 is likely to face diminishing returns because
A) the amount of fertilizer can only be increased to 5.
B) land and fertilizer are both fixed.
C) land and fertilizer are both variable.
D) land is fixed but fertilizer is variable.

Question

Table 2.4
-The firm depicted in Table 2.4 is likely to face diminishing returns because
A) the amount of fertilizer can only be increased to 5. 
B) land and fertilizer are both fixed. 
C) land and fertilizer are both variable. 
D) land is fixed but fertilizer is variable.

Quizplus · Accepted Answer

The firm in Table 2.4 has a fixed amount of land but can vary the amount of fertilizer it uses. As the amount of fertilizer increases from 2 to 4 to 5, the additional output from each additional unit of fertilizer decreases. This demonstrates diminishing returns to fertilizer, which is variable, but not to land, which is fixed.

Table 2.4 -The Firm Depicted in Table 2.4 Is Likely to Face