Question

The law of diminishing returns only applies in cases where:

Answer 1

Answer:

C)  there is at least one fixed factor of production.

Multiple-choice options

A) there is increasing scarcity of factors of production.

B) the price of extra units of a factor is increasing.

C) there is at least one fixed factor of production.

D) capital is a variable input.

Explanation:

he law of diminishing marginal returns cites that adding extra input while maintaining the others fixed will cause the overall output to decrease . Adding one more production input while keeping the rest intact decreases the marginal returns and increases the average production cost.

The law only applies where there at least one fixed input. When the firm uses more of the variable input, the firm's marginal product will eventually decrease.