The point where diminishing marginal returns has begun to affect production is best characterized by the point where the:
A) total product curve flattens out.
B) average product curve begins to be negatively sloped.
C) marginal product curve begins to be negatively sloped.
D) marginal product curve equals the average product curve.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occurs when adding additional units of input results in a decrease in the marginal product, which is represented by a negatively sloped marginal product curve. At the point where the marginal product curve begins to slope downward, it indicates that the production is experiencing diminishing marginal returns. The total product curve may continue to increase, but at a decreasing rate. The average product curve may still be positively sloped, but is not the best indicator of diminishing marginal returns. The point where the marginal product curve equals the average product curve is known as the maximum point of average product and does not necessarily indicate diminishing marginal returns.

The Point Where Diminishing Marginal Returns Has Begun to Affect