Question

When to Use the Principle of Diminishing Returns? You are the manager of a firm that produces memory chips for mobile phones.

In your decision about how much output to produce this week, would you use the principle of diminishing returns?
a.No, because in the short run some inputs are variable.
b.Only if I were free to vary all my inputs.
c.No, because I'm flexible in choosing my inputs.
D. Yes, because in the short run some inputs are fixe

Answer 1

The Principle of Diminishing Returns should be used when deciding output levels in the short run due to some inputs being fixed, affecting productivity.

Step-by-step explanation:

The Principle of Diminishing Returns should be applied when deciding how much output to produce as a manager of a firm producing memory chips for mobile phones. The correct answer is D. Yes, because in the short run some inputs are fixed. In the short run, inputs like capital cannot be increased to match the rise in labor, leading to diminishing returns as more workers are added beyond a certain point.

This principle helps to understand the point at which adding more of a variable input, such as labor, to fixed inputs yields progressively smaller increments of output, indicating an optimal level of production before inefficiency sets in.