Question

In the context of economics, when referring to the law of variable returns to a factor, which of the following statements accurately describes the relationship between input factors and output?

a) Output increases proportionally with each additional unit of input.
b) Output increases at a decreasing rate with each additional unit of input.
c) Output remains constant regardless of the quantity of input.
d) Output decreases with each additional unit of input.

Answer 1

The Law of Variable Proportion states that output increases at a decreasing rate with each additional unit of input.

Step-by-step explanation:

The Law of Variable Proportion in economics states that as the quantity of a single input factor is increased while keeping all other inputs constant, the output will initially increase, but eventually increase at a decreasing rate. This means that option b) output increases at a decreasing rate with each additional unit of input accurately describes the relationship between input factors and output.