In the short run, a firm will eventually experience rising per-unit costs because of
A) economies of scale.
B) diseconomies of scale.
C) the law of supply.
D) the law of diminishing returns.

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as a firm adds more and more of a variable input (such as labor), while holding all other inputs constant, eventually the marginal product of the variable input will decline. This means that each additional unit of the variable input will produce less output than the previous unit. As a result, the firm will have to incur higher per-unit costs to produce the same level of output, leading to a rise in per-unit costs in the short run.

In the Short Run, a Firm Will Eventually Experience Rising