Question

Which statement best illustrates the law of diminishing returns?

a. the average total cost of the last unit of a factor of production used is less than the average total cost of the previous factor of production
b. marginal product of the last unit of a factor of production used is less than the marginal product of the previous factor of production
c. average product of the last unit of a factor of production used is less than the average product of the previous factor of production
d. marginal cost of the last unit of a factor of production used is less than the marginal cost of the previous factor of production used.

Answer 1

The best statement illustrating the law of diminishing returns is that the marginal product of the last unit of a factor of production used is less than that of the previous unit, representing how each additional input contributes less to overall production as more inputs are added. option b.

Step-by-step explanation:

The statement that best illustrates the law of diminishing returns is: "b. marginal product of the last unit of a factor of production used is less than the marginal product of the previous factor of production." This statement clearly reflects the principle that when we add additional increments of resources to the production of a good or service, the marginal benefit from those additional increments will decline. This happens because with fixed inputs, each additional unit of input contributes less to overall production.

For example, in a farm setting, if a farmer continually adds water to the land, at first, the output increases, but eventually, additional water leads to smaller increments in output, and at some point may even reduce output due to factors like flooding. This pattern is a classic demonstration of diminishing marginal productivity, where the value of each additional unit of input decreases after a certain point.