The law of diminishing marginal returns
A) results in average variable cost (AVC), average total cost (ATC), and marginal cost (MC) curves eventually increasing at an increasing rate.
B) results in MC but not ATC curves eventually increasing at an increasing rate.
C) causes average fixed costs to decline continuously as output increases.
D) causes the difference between average total cost and average variable cost to shrink as output increases.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns implies that as more units of a variable input are added to fixed inputs, the additional output from each new unit of input eventually decreases. This leads to an increase in marginal cost, which in turn causes both AVC and ATC to eventually increase at an increasing rate.

The Law of Diminishing Marginal Returns