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Difficulty: EasyShort-Run Production and Law of Diminishing Returns

According to the law of diminishing returns, what eventually happens to the marginal product of a variable input as successive units of that input are added to a fixed input in the short run?

  1. It begins to declineAnswer
  2. B
    It increases at an increasing rate continuously
  3. C
    It immediately becomes negative
  4. D
    It remains permanently constant

Answer

The marginal product begins to decline.
The fundamental definition of the law of diminishing returns states that when increasing amounts of a variable factor are applied to a fixed quantity of other factors, a point is eventually reached where the addition to total product (marginal product) starts to decrease.

Step-by-Step Solution

1
Identify the core principle of the Law of Diminishing Returns.
The law governs short-run production where at least one factor of production is fixed.
Short-run constraints limit capacity as more variable factors (such as labor) are combined with fixed capital or land.
2
Analyze the behavior of marginal product as variable inputs increase.
After reaching a maximum point of efficiency, each additional unit of input contributes less additional output than the previous unit.
The fixed factor becomes crowded relative to the increasing quantity of the variable factor, leading to a fall in marginal product.

Key Concept

Law of Diminishing Marginal Returns
Estimated Time:45s
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Topics

Short-Run Production and Law of Diminishing Returns

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