Diminishing marginal returns __________.

Question

hold true when “capital is fixed” is a key assumption

occur in the long run

occur when each additional worker hired is becoming more productive than the previous worker

do not occur in a competitive market

Answer 1

Diminishing marginal returns hold true when “capital is fixed” is a key assumption.

This concept states that as you continue to add more of one input (like labor) to a fixed amount of another input (like capital), the additional output produced by the new input will eventually decrease. This is commonly illustrated in a production setting where one factor (usually capital) is held constant while the other factor (labor) is increased.