The principle of diminishing returns occurs:
A) when there are two or more inputs and all inputs are allowed to vary.
B) when there is only one input.
C) when there are two or more inputs and at least one input is held fixed.
D) when there are two or more inputs and all inputs are held fixed.

Question

Quizplus · Accepted Answer

The principle of diminishing returns occurs when there are two or more inputs and at least one input is held fixed. This means that as one input is increased while the other(s) are held constant, the marginal product of the variable input will eventually decrease. This occurs because the fixed input becomes a limiting factor in the production process, leading to a point where additional units of the variable input do not contribute as much to output.

The Principle of Diminishing Returns Occurs