Variable Cost of Production

The following questions refer to the following table which shows a firm's variable costs of production.

-Refer to Variable Cost of Production.For what levels of output does the firm experience diminishing marginal returns?
A) For all levels of output.
B) For the first,second,and third units of output.
C) Beyond the third unit of output.
D) For the fifth and all subsequent units of output.

Question

Variable Cost of Production

The following questions refer to the following table which shows a firm's variable costs of production.

-Refer to Variable Cost of Production.For what levels of output does the firm experience diminishing marginal returns?
A) For all levels of output. 
B) For the first,second,and third units of output. 
C) Beyond the third unit of output. 
D) For the fifth and all subsequent units of output.

Quizplus · Accepted Answer

Diminishing marginal returns occur when the marginal product of labor decreases as more units of labor are added. This typically happens as the fixed factors of production, such as capital or land, become limiting. Therefore, the firm would experience diminishing marginal returns beyond a certain level of output, which in this case is the third unit of output.