When a Firm Experiences Increasing Marginal Returns

question 300

Multiple Choice

When a firm experiences increasing marginal returns

• A) total output rises at a diminishing rate.
• B) total output rises at an increasing rate.
• C) average product falls.
• D) marginal product falls.

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Definitions:

Marginal Product

The increased output achieved by adding one more unit of a certain input, with all other inputs held steady.

Marginal Cost

The cost of producing one additional unit of a good or service, used in decision-making on production levels.

Average Total Cost

The average cost per unit of output expressed as the total production cost divided by the number of units produced.

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.