The law of diminishing marginal returns explains why:
A)monopolies have a guaranteed profit margin.
B)short-run MC and AVC curves are U-shaped.
C)the production possibilities curve is bowed out.
D)long-run supply curves are downward sloping.
E)total product is a straight line.

Question

The law of diminishing marginal returns explains why:​
A)monopolies have a guaranteed profit margin.
B)short-run MC and AVC curves are U-shaped.
C)the production possibilities curve is bowed out.
D)long-run supply curves are downward sloping.
E)total product is a straight line.

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as additional units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. This explains why short-run MC and AVC curves are U-shaped, as the additional input initially increases output but eventually leads to diminishing returns and higher costs per unit of output.

The Law of Diminishing Marginal Returns Explains Why:​

The Law of Diminishing Marginal Returns Explains Why: