Diminishing marginal returns occur when
A)one input is increased and the others are held constant.
B)all inputs are increased.
C)one input is decreased while the other is increased.
D)all inputs are decreased.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occur when one input (e.g. labor) is increased while the other inputs (e.g. capital, raw materials) are held constant. As the amount of labor increases, the marginal product of each additional unit of labor eventually begins to decrease, resulting in diminishing marginal returns. This can happen because the fixed input (capital, raw materials) cannot be increased in the short run, leading to inefficient use of the variable input (labor).

Diminishing Marginal Returns Occur When