When increasing amounts of a variable factor are added to a fixed factor, the output increases but at a diminishing rate.

Question

Quizplus · Accepted Answer

This statement describes the law of diminishing marginal returns. As more variable factors are added to a fixed factor, the output will increase but eventually begin to level off and even decrease. This occurs because the fixed factor, such as land or equipment, can only handle so much input before becoming less efficient or productive.

When Increasing Amounts of a Variable Factor Are Added to a Fixed