Diminishing returns to an input occur:
A)when all inputs are fixed.
B)when some inputs are fixed and some are variable.
C)when all inputs are variable.
D)only in the long run.

Question

Quizplus · Accepted Answer

Diminishing returns to an input occur when some inputs are fixed and some are variable. As more of the variable input is added to the fixed input, a point is reached where the marginal product of the variable input begins to decline. This is known as the point of diminishing marginal returns. In contrast, if all inputs are fixed, there can be no variation in output regardless of how much of the input is added, and if all inputs are variable, there is no fixed input to which more of the variable input can be added, so no point of diminishing marginal returns can be reached. Additionally, the concept of diminishing returns applies to both the short run and the long run, so option D is incorrect.

Diminishing Returns to an Input Occur