Question

Ceteris paribus, the law of diminishing returns states that beyond some point, the:________.

a. Marginal product of a factor of production diminishes as more of it is employed with a given quantity of other inputs
b. Output of any good increases as more of a variable input is used
c. Returns on stocks and bonds diminish with higher security prices
d. Addition to total utility diminishes as more units of a good are consumed

Answer 1

a. Marginal product of a factor of production diminishes as more of it is employed with a given quantity of other inputs

Step-by-step explanation:

The law of diminishing return states that in applying a successive unit of variable cost to a fixed cost, the return per unit of variable cost will eventually diminish or fall.

What the above means is that at a certain point, the continuous addition of land, labor , capital and entrepreneur will bring about a fall or reduction in output.

An example is where a company operate at a maximum level, there would be a fall in output even when additional workers are employed given that the factors of production are constant.