In the short run, the law of ______________ explains that as more units of a variable input (i.e. labour or raw materials) are added to the fixed amounts of land and capital, the change in total output initially will rise and then fall.a.Increasing returnsb.Diminishing returnsc.Constant returnsd.Marginal returns
Question
In the short run, the law of ______________ explains that as more units of a variable input (i.e. labour or raw materials) are added to the fixed amounts of land and capital, the change in total output initially will rise and then fall.a.Increasing returnsb.Diminishing returnsc.Constant returnsd.Marginal returns
Solution
The correct answer is b. Diminishing returns.
Here's the step by step explanation:
-
The law of diminishing returns, also known as the law of variable proportions, states that if one factor of production is increased while other factors are held constant, the overall returns will relatively decrease after a certain point.
-
Initially, when more units of a variable input (like labor or raw materials) are added to fixed amounts of land and capital, the total output might increase. This is due to more efficient use of fixed resources or specialization.
-
However, as you continue to add more units of the variable input, the rate of increase in total output will start to slow down, and eventually, the total output will start to decrease. This is because the fixed inputs (like land and capital) can only support a certain amount of the variable input.
-
Therefore, the law of diminishing returns explains why the change in total output will initially rise and then fall when more units of a variable input are added to fixed amounts of land and capital.
Similar Questions
The law of diminishing marginal returns means that when one uses more and more of an input:
Which of the following statements best expresses the law of diminishing marginal returns?Multiple ChoiceThe same percentage increase in all inputs will result in a higher percentage increase in total output.As successive amounts of one resource (labour) are added to fixed amounts of other resources, beyond some point the resulting extra output will decline.Because large-scale production allows the realization of increasing returns to scale, the costs of production vary directly with the level of output.The same percentage increase in all inputs will result in a lower percentage increase in total output.Population growth automatically adjusts to that level at which the average product per worker will be at a maximum.
According to the law of diminishing marginal returnsMultiple Choicethe additional product generated by additional units of an input will eventually diminish.the additional inputs necessary to produce an additional unit of output will diminish.employing additional inputs will diminish total product.total product will fall and then rise as additional units of an input are employed.
Which of the following explains why the law of diminishing marginal returns occurs?APer-units costs for a firm increase as the firm builds successively larger plant sizes.BSuccessive units of a good yield lesser amounts of satisfaction to consumers.CAdditional variable resources crowd fixed resources.DWhen a firm reduces price to increase sales, additional revenue to the firm is less than the price.EWhen the price of a product is reduced, total revenue falls.
Multiple Choice QuestionAs one more additional variable input such as labor is applied to fixed capital such as plant and equipment, the marginal product, or additional output, will fall. This describes the law of Blank______.Multiple choice question.supplyincreasing returnsdiminishing returnsdemand
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.