The Law of Diminishing Returns Helps to Explain Why

question 42

Multiple Choice

The law of diminishing returns helps to explain why:

• A) Marginal cost increases,in the short run,as more output is produced.
• B) The demand curve for a competitive firm is perfectly elastic.
• C) The total cost curve diminishes as long as output increases.
• D) Marginal cost decreases as more output is produced.

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Definitions:

Producer Surplus

The difference between the amount that producers are willing and able to sell a good for and the actual amount they receive (higher market price).

Market Equilibrium

A condition in a market where the quantity demanded by consumers equals the quantity supplied by producers, leading to a stable price.

Producer Surplus

The difference between the amount a producer is paid for a good and the minimum amount they would be willing to accept.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually pay.