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:

Semiannual Compounding

A method of calculating interest where the capital is compounded twice a year.

Compounded Semiannually

An interest accruing method where interest is calculated and added to the principal every six months, potentially leading to higher returns over time due to the compounding effect.

Quarterly Compounded

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, done every quarter.

Effective Rate

An adjustment of the nominal interest rate on a loan or financial product to reflect an annual compound interest rate, with payments made at the end of the period.