Question

Increasing specialization leads to _____ marginal cost. But diinishing returns set in once the benefits of specialization are exhausted and marginal cost _____.

Answer 1

Increasing specialization initially leads to decreasing marginal cost, but diminishing returns occur once the benefits of specialization are exhausted and marginal cost increases.

Step-by-step explanation:

The law of diminishing returns states that as a firm employs more resources, the marginal benefit from those additional resources will decline. In terms of production and specialization, increasing specialization initially leads to decreasing marginal cost. However, once the benefits of specialization are exhausted, diminishing returns set in and marginal cost increases.