The law of diminishing marginal returns states that:
A)when the marginal product is above the average product, average product must be increasing.
B)when the marginal product is below the average product, average product must be decreasing.
C)as the use of one input increases holding the quantities of the other inputs fixed, the marginal product of the input eventually declines.
D)as the use of all inputs increases, the marginal product of the inputs eventually declines.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns is a concept from production theory that explains that as the use of one input increases, holding the quantities of the other inputs fixed, the marginal product of the input eventually declines. This occurs because the fixed inputs constrain the ability to vary the input in question, eventually leading to diminishing returns. Therefore, option C is the correct answer. Option A is incorrect because the marginal product can be above the average product even when it is decreasing. Option B is incorrect because the marginal product can be below the average product even when it is increasing. Option D is incorrect because not all inputs will necessarily experience diminishing returns at the same time. The law of diminishing marginal returns states that as the use of one input increases holding the quantities of the other inputs fixed, the marginal product of the input eventually declines. This means that adding more units of one input will eventually result in smaller increases in output, and may even cause a decrease in output if the input becomes too abundant relative to other inputs.

The Law of Diminishing Marginal Returns States That