When a firm is experiencing diminishing returns
A) average cost is always increasing.
B) average cost is always decreasing.
C) marginal costs are always less than average costs.
D) none of the above

Question

Quizplus · Accepted Answer

Diminishing returns means that the marginal product of each additional unit of input is decreasing. This does not necessarily mean that average cost is increasing or decreasing, and it also does not necessarily mean that marginal cost is always less than average cost. Therefore, none of the options A, B, or C are correct.

When a Firm Is Experiencing Diminishing Returns