The Law of Diminishing Marginal Returns

question 360

Multiple Choice

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.

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Definitions:

Increase Assets

Actions or transactions that cause a rise in the total value of a company's assets.

Decrease Assets

A reduction in the value or quantity of the assets owned by a company, which can impact its overall financial health.

Common Stock

A type of equity security that represents ownership in a corporation, giving the shareholder voting rights and a share in the company's profits, usually in the form of dividends.

Accounting Equation

The fundamental equation of double-entry bookkeeping, stating that assets equal liabilities plus shareholders' equity (Assets = Liabilities + Equity).