What Does the Law of Diminishing Marginal Return State

question 34

Multiple Choice

What does the law of diminishing marginal return state?

• A)That at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline.
• B)That at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.
• C)That in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added.
• D)That average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases.

---

Definitions:

Total Cost

The total expenses involved in creating goods or services, encompassing both constant and fluctuating costs.

Perfectly Competitive Firm

A business that operates in a perfectly competitive market, where it is a price taker due to the presence of many sellers offering homogeneous products.

Marginal Cost

The cost incurred by producing one more unit of a good or service.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of a product or service.