If marginal product is at a maximum, then marginal cost is at a minimum.

Question

Quizplus · Accepted Answer

This statement is a fundamental principle of economics known as the Law of Diminishing Marginal Returns, which states that as more units of a variable input (such as labor) are added to a fixed input (such as capital), the marginal product (or output produced by each additional unit of input) will eventually decrease. When marginal product is at a maximum, it means that each additional unit of input is contributing the most possible to output, which also means that the cost of producing each additional unit of output (marginal cost) is at a minimum. Therefore, A is the correct answer.

If Marginal Product Is at a Maximum, Then Marginal Cost