Question

Which of the following provides an example of the law of diminishing returns?


A farm doubles all its inputs and observes that output less than doubles.

Option A,A farm doubles all its inputs and observes that output less than doubles.

a

A textile producer’s output increases by 5 units when adding a fourth worker and by 7 units when adding a fifth worker.

Option B,A textile producer’s output increases by 5 units when adding a fourth worker and by 7 units when adding a fifth worker.

b

If a fixed input increases, fewer additional units of a variable input will be needed to increase output by one unit.

Option C,If a fixed input increases, fewer additional units of a variable input will be needed to increase output by one unit.

c

As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

Option D,As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

d

More cooks in a single kitchen will increase the number of meals produced by increasing amounts.

Option E,More cooks in a single kitchen will increase the number of meals produced by increasing amounts.

e

Question
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Answer 1

Correct answer: D.

Explanation: The law of diminishing returns says that as more units of a variable input (e.g., labor) are added to fixed inputs (e.g., machines), the additional output from each extra unit eventually falls. Option D directly describes this. (A describes decreasing returns to scale, B and E describe increasing marginal returns, C is incorrect.)