The term diminishing returns refers to:
A) a falling interest rate that can be expected as one's investment in a single asset increases.
B) a reduction in profits caused by increasing output beyond the optimal point.
C) a decrease in total output due to the firm hiring uneducated workers.
D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

Question

Quizplus · Accepted Answer

Diminishing returns occur when adding an additional unit of a variable input, like labor, results in a smaller increase in output, assuming all other inputs are constant.

The Term Diminishing Returns Refers To