Question

Marginal output is rising, then it is

A. possible to have diminishing returns but not negative returns
B. possible to have negative returns but not diminishing returns
C. possible to have both diminishing returns and negative returns
D. not possible to have diminishing returns or negative returns

Answer 1

Diminishing marginal returns and negative returns can occur when the marginal output is rising.

Step-by-step explanation:

The concept of economies of scale, where average costs decline as production expands, is different from the concept of diminishing marginal returns. Diminishing marginal returns refers to a situation where adding more units of a variable input results in a decrease in the additional output produced. It is possible to have both diminishing marginal returns and negative returns when the marginal output is rising. This means that initially, adding more units of the variable input increases output at a decreasing rate, but at some point, it may start to decrease or become negative.