Which of the following statements is true?
A)Diminishing marginal returns means that total output decreases as more of the variable inputs are employed.
B)Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs.
C)Diminishing marginal returns implies that there will never be increasing returns to scale.
D)Diminishing marginal returns implies that the firm's profits will be shrinking as it produces more of its product.

Question

Quizplus · Accepted Answer

Diminishing marginal returns refer to the point at which the level of benefits gained is less than the amount of money or energy invested. It means that after a certain point, each additional unit of input will produce less additional output. This does not necessarily mean total output decreases (as in A), nor does it imply that profits will shrink (as in D), or that there can't be increasing returns to scale in some ranges of production (contrary to C).

Which of the Following Statements Is True