Asked by Shay D. Davis on Jul 11, 2024
Verified
As output expands,
A) increasing returns will follow diminishing returns.
B) diminishing returns will follow increasing returns.
C) increasing returns and diminishing returns will occur simultaneously.
Diminishing Returns
The principle stating that if one factor of production is increased while others remain constant, the overall returns will initially increase but there will come a point where the added benefits will start to decrease.
Increasing Returns
An increase in firm’s output by a larger percentage than the percentage increase in its inputs.
- Learn about the notion and outcomes of the law of diminishing returns in different domains.
- Examine and evaluate the implications of U-shaped average total cost curves becoming flatter on returns to scale.
Verified Answer
MI
maggie irelandJul 18, 2024
Final Answer :
B
Explanation :
According to the law of diminishing returns, in the short run, as more units of variable input are added to the fixed input, eventually a point is reached beyond which the additional output produced by each additional unit of variable input decreases. This implies that beyond a certain level of output, the returns to variable input will start diminishing. Therefore, as output expands, diminishing returns will follow increasing returns.
Learning Objectives
- Learn about the notion and outcomes of the law of diminishing returns in different domains.
- Examine and evaluate the implications of U-shaped average total cost curves becoming flatter on returns to scale.