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

question 127

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 average cost increases.
• 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:

Marginal Cost

The increment in overall expenditure that comes from the production of an extra unit of a product or service.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and products that are similar enough to be considered substitutes.

Legislation Limits

Restrictions or caps established by laws or regulatory bodies that aim to control or regulate certain activities or behaviors.

Cost Function

A mathematical formula that describes the total cost of production as a function of the quantity of output produced.