Diminishing marginal returns occur because
A)All inputs are variable in the short-run
B)All inputs are variable in the long-run
C)Some inputs are fixed and some inputs are variable in the short-run
D)None of the above

Question

Quizplus · Accepted Answer

Diminishing marginal returns occur because in the short-run, some inputs are fixed while some are variable. As more and more of the variable inputs are added to the fixed inputs, the marginal product of the variable inputs eventually decreases. This is due to the fact that the fixed inputs (e.g. land or capital) cannot be increased proportionally to the variable inputs, resulting in a point where additional units of the variable input start to yield decreasing returns.

Diminishing Marginal Returns Occur Because