Ceteris paribus, the law of diminishing returns states that beyond some point, the
A) Returns on stocks and bonds diminish with higher security prices.
B) Addition to total utility diminishes as more units of a good are consumed.
C) Marginal physical product of a factor of production diminishes as more of that factor is used.
D) Output of any good increases as more of a variable input is used.

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as more units of a certain factor of production are added, there comes a point where the marginal physical product of that factor begins to diminish. In other words, the additional output gained from each additional unit of the input decreases, and eventually becomes negative. This means that production becomes less efficient and costlier as more units of the input are added beyond a certain point. Choices A, B, and D do not accurately describe the law of diminishing returns.

Ceteris Paribus, the Law of Diminishing Returns States That Beyond