The best explanation for ________ is a fixed factor causes diminishing returns to other factors.
A) increasing returns to scale
B) a horizontal marginal revenue curve
C) a perfectly competitive firm earning economic profits in the long run
D) the shape of a short-run marginal cost schedule

Question

Quizplus · Accepted Answer

The shape of a short-run marginal cost schedule reflects diminishing returns to other factors because, in the short run, at least one factor of production (e.g., capital) is fixed. As more units of a variable factor (e.g., labor) are added, each additional unit adds less to output than the previous one, leading to increasing marginal costs.

The Best Explanation for ________ Is a Fixed Factor Causes