Diminishing returns occur because
A)Of inefficiency in the production process.
B)Of the use of inferior factors of production.
C)A firm increases the amount of a variable input without changing a fixed input.
D)Of lower opportunity costs of the factors of production.

Question

Quizplus · Accepted Answer

Diminishing returns occur when a firm increases the amount of a variable input (such as labor) without changing a fixed input (such as capital). As more and more of the variable input is added, the marginal product of that input eventually decreases, leading to diminishing returns. This occurs because the fixed input becomes a constraint on the production process. Options A, B, and D are not directly related to the concept of diminishing returns.

Diminishing Returns Occur Because