The law of diminishing marginal product shows the relationship
A) between accounting and economic profits.
B) between short-run and long-run outputs of a firm.
C) between inputs and outputs for a firm in the short run.
D) between inputs and outputs for a firm in the long run.

Question

Quizplus · Accepted Answer

The law of diminishing marginal product states that as a firm adds more units of a variable input (such as labor) to a fixed input (such as capital) in the short run, the marginal product of the variable input will eventually decrease. This means that each additional unit of the variable input will contribute less and less to overall output, eventually leading to negative returns to scale. Therefore, the law of diminishing marginal product describes the relationship between inputs and outputs for a firm in the short run.

The Law of Diminishing Marginal Product Shows the Relationship