The principle that "as one input increases while the other inputs are held fixed, output beyond some point will exhibit increases at a decreasing rate" is known as the:
A) principle of opportunity cost.
B) spillover principle.
C) marginal principle.
D) principle of diminishing returns.

Question

Quizplus · Accepted Answer

The principle being described is the principle of diminishing returns, which states that as one input (such as labor) is increased while other inputs (such as capital) are held fixed, at some point the output will begin to increase at a decreasing rate. This occurs because the marginal product of the variable input (the additional output gained from each additional unit of labor, for example) eventually starts to decrease as more of that input is added.

The Principle That "As One Input Increases While the Other