The law of diminishing marginal returns states that:
A) the marginal product of labor declines as all inputs are increased.
B) production functions exhibit decreasing returns to scale.
C) the marginal product of labor returns as more capital is used.
D) the marginal product of a factor eventually diminishes as more of the input is used, holding other inputs fixed.
E) the marginal product of a factor always diminishes as more of the input is used, holding other inputs fixed.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as more of a factor is added, holding all other factors constant, the marginal product of that factor will eventually diminish. This is due to the fact that as more of the factor is added, it becomes more difficult to efficiently allocate all inputs, resulting in diminishing marginal returns.

The Law of Diminishing Marginal Returns States That