The figure shows three different production functions. The law of diminishing returns can be seen in which of the following movements in the figure?

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as more units of one input are added to fixed quantities of all other inputs, the marginal product of that input will eventually decrease. In the figure, we can see that from point C to point D, the marginal product of the variable input (labor) starts decreasing, which is the indication of the law of diminishing returns. Before point C, the marginal product of labor is increasing, and after point D, it starts decreasing even faster. Therefore, the correct answer is C.

The Figure Shows Three Different Production Functions