The law of decreasing returns applies to
A) the long-run average cost curve.
B) average total cost.
C) diseconomies of scale.
D) changes in a variable input with a given quantity of fixed inputs.
E) changes in a fixed input with a given quantity of variable inputs.

Question

Quizplus · Accepted Answer

The law of decreasing returns (also called the law of diminishing marginal returns) refers to the phenomenon where adding more of a variable input to a fixed amount of a fixed input will eventually result in smaller increases in output. This is reflected in the short-run production function where, after a certain point, the marginal product of the variable input will decrease. Therefore, the law of decreasing returns applies to changes in a variable input with a given quantity of fixed inputs.

The Law of Decreasing Returns Applies to