Define Diminishing Returns in Production and Illustrate It with the Graph

question 34

Essay

Define diminishing returns in production and illustrate it with the graph of a production function.

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Definitions:

AVC

Average Variable Cost, which is the total variable costs of production divided by the quantity of output produced.

Marginal Cost

The increase in total cost that arises from producing an additional unit of a good or service.

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the quantity of output produced.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, illustrating how fixed costs per unit change with output levels.