The law of diminishing returns states that marginal costs fall as a company tries to expand output.

Question

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The law of diminishing returns states that as a company increases the input of a particular factor of production, while keeping all other factors constant, the marginal output eventually decreases, and marginal costs increase. This is due to the fact that the increase in output eventually leads to inefficiencies and cost increases.

The Law of Diminishing Returns States That Marginal Costs Fall