When a firm is experiencing diminishing marginal returns
A) average cost is increasing.
B) average cost is decreasing.
C) marginal costs are increasing.
D) marginal costs are decreasing.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occurs when the marginal cost of production increases as more units of output are produced. This means that the cost of producing each additional unit becomes higher, which leads to an increase in marginal cost. As a result, average cost increases as well.

When a Firm Is Experiencing Diminishing Marginal Returns