Question

If the slope of a graph never increases but sometimes decreases as the level of the activity increases, then it is said to have ________.

1) increasing marginal returns
2) constant marginal returns
3) decreasing marginal returns
4) negative marginal returns

Answer 1

The situation described corresponds to decreasing marginal returns, which fall under the law of diminishing returns in economic theory.

Step-by-step explanation:

If the slope of a graph never increases but sometimes decreases as the level of the activity increases, then it is said to have decreasing marginal returns. This concept is a part of the law of diminishing returns, which states that as we add additional increments of resources to producing a good or service, the marginal benefit from those additional increments will decline. Essentially, you could start with high productivity from your first few units of input, but as you continue to add more, the extra output generated by each additional unit of input will start to fall.