The law of diminishing marginal returns states that when the marginal product is below the average product, average product must be decreasing.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as additional units of a variable input are added to fixed inputs, the marginal product will eventually decrease. However, this does not necessarily mean that the average product will also decrease. The average product may continue to increase or remain constant, even as the marginal product decreases. The law of diminishing marginal returns states that as additional units of a variable input are added to a fixed input, the marginal product eventually decreases. However, this does not necessarily mean that the average product is decreasing. In fact, the average product may still be increasing as long as the marginal product is positive and greater than the average product. The two concepts are related but not equivalent.

The Law of Diminishing Marginal Returns States That When the Marginal