Final answer:
The best definition for diminishing marginal product is that the marginal product of an input decreases as the input quantity increases. This concept occurs in the short run where some factors, like capital, are fixed, leading to a decrease in the additional output gained from more labor.
Step-by-step explanation:
The definition that best describes diminishing marginal product is: A) Marginal product of an input declines as the quantity of the input increases. Diminishing marginal product occurs during the production process when one variable input, such as labor, is added to a set amount of other fixed inputs like capital. Initially, the addition of more labor might improve productivity, but eventually, the benefit from each additional unit of labor will start to decline. This is because, in the short run, at least one of the factors of production (capital) is fixed and cannot be increased to complement the additional labor, leading to inefficiencies.
On the other hand, the concept of economies of scale pertains to the long-run, where all inputs, including capital and labor, can be increased. Here, increased production often leads to lower average costs because the firm can better utilize its resources. Thus, while diminishing marginal product refers to a decline in the production benefit of an additional input in the short run, economies of scale refers to a reduction in the average cost of production in the long run as all inputs are scaled up together.