In the short run, at least one factor of production is fixed. This implies that beyond some level of output a firm will
A) "learn by doing."
B) experience diminishing marginal returns.
C) experience increasing marginal returns.
D) have a U-shaped long-run average cost curve.

Question

Quizplus · Accepted Answer

When at least one factor of production is fixed in the short run, the law of diminishing marginal returns will come into effect, which means that beyond some level of output, the firm will start to experience diminishing marginal returns. This is because the fixed factor becomes a bottleneck, while the other variable factors are added.

In the Short Run, at Least One Factor of Production