The Law of Diminishing Marginal Returns

question 111

Multiple Choice

The law of diminishing marginal returns

• A)explains why the average total cost and marginal cost curves are U-shaped in the short run.
• B)explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run.
• C)causes average total cost to rise at a decreasing rate as output increases.
• D)causes the difference between average total cost and average variable cost to get smaller as output increases.

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Definitions:

Annual Income

The total earnings or revenue generated by an individual or business in one fiscal year before any deductions.

Capital Projects

Large, long-term investments undertaken to create, expand, or replace a company's physical assets.

Cash Payback Period

The duration it takes for the earnings from an investment to cover the initial amount invested.

Annual Net Cash Flows

The total amount of money, including inflows minus outflows, that a business generates over one year.