"Diminishing marginal returns" means that:
A) each additional unit of an input used will decrease output.
B) each additional unit of an input used will increase output, but by smaller and smaller amounts.
C) each additional unit of an input used will increase output by larger and larger amounts.
D) the firm is maximizing profit.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occurs when each additional unit of an input used increases output, but by smaller and smaller amounts. This means that there is a point where adding more of an input will not bring any significant increase in output, and may even cause a decrease in output. This is an important concept for firms to consider when deciding how much of an input to use in production.

"Diminishing Marginal Returns" Means That