The law of diminishing returns only applies in cases where
A)there is increasing scarcity of factors of production.
B)the price of extra units of a factor is increasing.
C)there is at least one fixed factor of production.
D)capital is a variable input.

Question

Quizplus · Accepted Answer

The law of diminishing returns states that if we increase one input while keeping other inputs fixed, the additional output (returns) gained from the additional input will eventually start to decrease. This law only applies when there is at least one fixed factor of production, as it is the inability to change all inputs that leads to diminishing returns.

The Law of Diminishing Returns Only Applies in Cases Where