Diminishing Marginal Returns Occur When

question 167

Multiple Choice

Diminishing marginal returns occur when

• A) the average product of the variable input eventually diminishes.
• B) the marginal product of an additional worker is less than the marginal product of the previous worker hired.
• C) the firm hires cheap, less-skilled workers in place of expensive, high-skilled workers.
• D) total product diminishes.

---

Definitions:

Monopolist's Demand Curve

The demand curve faced by a monopolist, which is the same as the market demand curve, indicating that the monopolist can set the price only by choosing the quantity to produce.

Elastic

Describes a situation in which the demand or supply for a product changes significantly when its price changes.

Barriers

Obstacles that prevent or hinder entry into a market or the pursuit of certain activities, which can be economic, legal, technical, or natural in nature.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a benefit to consumers equal to the cost of producing it.