PRC-3 · Chapter 12 · Question 48 of 69
The Law of Diminishing Returns can only apply to a business under which specific condition?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) When at least one factor of production is fixed
Explanation
Diminishing returns is strictly a short-run phenomenon that occurs when increasingly more variable inputs are added to a constrained, fixed capacity input (like a factory building).
More Firm Theory MCQs
- Q50Which of the following business expenses would definitively act as a 'Variable Cost'?
- Q51Which of the following elements would NOT act as a 'barrier to entry' preventing new firms from joining an industry?
- Q52In an oligopolistic market, what is the primary economic purpose of forming a 'Cartel'?
- Q53The Law of Diminishing Marginal Returns states that as more variable factors of production are added to a fixed factor:
- Q54Which of the following statements regarding short-run cost curves is mathematically correct?