What Is the Difference Between "Diminishing Marginal Returns" and "Diseconomies

question 80

Multiple Choice

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

• A)Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.
• B)Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.
• C)Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why long run average total costs increase.
• D)Diminishing marginal returns,which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

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Definitions:

Financial Break-Even

The point at which revenues equal expenses and neither profit nor loss is realized.

Required Rate

Also known as the Required Rate of Return, it is the minimum annual percentage return an investor expects to achieve from an investment.

Discounted Payback

The period of time required to recoup the cost of an investment considering the time value of money through discounted cash flows.

Financial Basis

The underlying value or criteria used for accounting or financial management purposes, often referred to as the method of recognizing revenues and expenses.