PRC-3 · Chapter 12 · Question 31 of 69
A restaurant owner keeps putting more chefs into a tiny kitchen. Initially, output spikes, but eventually, the chefs bump into each other and the extra output generated by each new chef declines. This specific phenomenon is the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Law of diminishing marginal returns
Explanation
The law of diminishing (marginal) returns states that adding more variable inputs to a fixed input will eventually yield progressively smaller marginal increases in output.
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