Exhibit 21-2

-Refer to Exhibit 21-2. Diminishing marginal returns set in with the addition of which unit of the variable input?

Question

Exhibit 21-2
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-Refer to Exhibit 21-2. Diminishing marginal returns set in with the addition of which unit of the variable input?

Quizplus · Accepted Answer

Diminishing marginal returns occur when adding an additional factor of production results in a smaller increase in output than the previous increase. This typically happens when there is a fixed factor of production (like machinery or land) and more and more of a variable factor (like labor) is added. Without seeing Exhibit 21-2, the general principle is that diminishing marginal returns set in when each additional unit of input contributes less to the output than the unit before. The correct answer, D, suggests that this phenomenon starts with the addition of the fourth unit of the variable input, implying that it is at this point the output increase from adding another unit of input begins to decline compared to the increase from the previous unit.

Exhibit 21-2 ​

Exhibit 21-2