The marginal revenue product (MRP) of land declines as more land is brought into production because

Question

Quizplus · Accepted Answer

The principle of diminishing returns states that as more units of a variable input, in this case land, are added to a fixed amount of other inputs, the marginal product of each additional unit of the variable input will eventually decline. This means that the marginal revenue product of land, which is directly tied to its marginal product, will also decline as more land is brought into production. Land being a "free and nonreproducible gift of nature" and the supply of land being fixed may be true, but they do not directly explain why the MRP of land declines. Land rent having no incentive function is not a relevant explanation either.

The Marginal Revenue Product (MRP) of Land Declines as More