Diminishing marginal returns means that as you combine more units of a variable resource with a set of fixed resources:

Question

Quizplus · Accepted Answer

Diminishing marginal returns occur when the marginal physical product of each additional unit of the variable resource decreases with an increase in the fixed resources. This means that the production increases with the addition of each variable resource, but the rate of increase or marginal physical product decreases as we add more units of the resource. Therefore, the correct answer is option B, where the marginal physical product decreases.

Diminishing Marginal Returns Means That as You Combine More Units