CIMA BA1 · Chapter 7 · Question 2 of 11
The law of diminishing returns states that:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) As more units of a variable factor are added to a fixed factor, the marginal product of the variable factor will eventually fall
Explanation
Diminishing marginal returns is a short-run concept: with at least one factor fixed, each additional unit of the variable factor eventually adds less to output than the previous one. This causes short-run marginal and average variable costs to rise. Diseconomies of scale are a separate long-run concept.
More Costs, revenue and market structures MCQs
- Q4Which of the following is an EXTERNAL economy of scale?
- Q5Which of the following is NOT a characteristic of a perfectly competitive market?
- Q6A profit-maximising firm will produce at the output where:
- Q7In the short run, a perfectly competitive firm making a loss should continue to produce as long as:
- Q8Compared with a perfectly competitive industry with the same cost conditions, a profit-maximising monopolist will normally: