Diminishing returns to a factor implies that with capital fixed,
A) as labor increases output always increases.
B) as output increases, labor increases.
C) as labor increases, output decreases.
D) as labor increases, labor productivity eventually decreases.

Question

Quizplus · Accepted Answer

Diminishing returns to a factor occur when an input (in this case, labor) is increased while other inputs (capital) are held constant, and the resulting increase in output becomes smaller and smaller. Eventually, increasing the input will lead to a decrease in output, i.e., productivity of the input. Therefore, as labor increases, labor productivity eventually decreases, which is option D.

Diminishing Returns to a Factor Implies That with Capital Fixed