Question

A company opts not to purchase more resources, since additional output will not increase their revenue. Which BEST

Answer 1

Answer:

D: declining marginal benefit

Explanation:

Declining benefits is a concept explained in the theory of diminishing marginal returns.  As per this theory, additional deployment of an input while holding the other factors constant will lead to negative returns.  

The term marginal refers to one more additional input or output. Marginal returns is the additional gain resulting from the sale or production of an extra unit. A firm enjoys positive marginal returns until production gets to its capacity level. Further input after this level results in decreasing gains.

This company opts not to purchase more inputs because it has reached its optimal level. Additional inputs will lead to reduced returns and, eventually, losses.