Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?

Question

Quizplus · Accepted Answer

The observation that adding a second layer of fertilizer increases the crop, but not as much as the first layer, is an example of the law of diminishing returns. This economic concept states that as more units of a variable input are added to a fixed input, the marginal product of the variable input eventually decreases. In this case, the fixed input is likely the amount of land available for growing zucchini, and the variable input is the fertilizer applied. The first layer of fertilizer may have been able to increase the yield significantly, but the second layer is likely to have a smaller effect due to the fixed constraints of the land.

Bill Lives in Montana and Likes to Grow Zucchini