PRC-3 · Chapter 12 · Question 53 of 69
The Law of Diminishing Marginal Returns states that as more variable factors of production are added to a fixed factor:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Output will rise, but eventually at a decreasing rate after a certain point
Explanation
The law specifically outlines that while adding workers initially boosts output efficiently, eventually the fixed constraints cause the extra (marginal) output of each new worker to diminish.
More Firm Theory MCQs
- Q55When a firm's Average Cost (AC) is visibly rising on a graph, what must definitively be true about its Marginal Cost (MC)?
- Q56For a downward-sloping demand curve, the firm's Marginal Revenue (MR) is strictly greater than zero only if:
- Q57By substituting the Total Revenue (TR) equation into the Average Revenue (AR) formula, we mathematically observe that AR is always equal to:
- Q58Price discrimination by a monopoly (charging different prices to different groups) is impossible or highly ineffective if:
- Q59Which of the following is NOT a fundamental characteristic of an Oligopoly market structure?