Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreased marginal product of that factor, this is an example of ?
Correct answer: B. The law of diminishing returns
- A. decreasing returns to scale
- B. The law of diminishing returns
- C. constant returns to scale
- D. an inefficient production technique
Explanation
When other inputs are fixed and additional units of one variable input eventually add less to output, the law of diminishing returns is operating. Returns to scale instead concern changing all inputs together.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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