When an Additional Unit of a Variable Input Adds Less

question 80

Multiple Choice

When an additional unit of a variable input adds less to total product than the previous unit, the firm must be experiencing:

• A)increasing returns.
• B)diminishing marginal returns.
• C)diminishing total returns.
• D)diminishing marginal returns and diminishing total returns.

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Definitions:

Fixed Price

A specific price point that does not change over time, often set for products, services, or agreements.

Asset

An economic resource owned or controlled by an individual or company, expected to produce future benefits.

Strike Price

The specified price at which an options contract can be executed, determining the buying or selling price of the underlying asset.

Option Contract

A contract which grants the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price within a specific time period.