The larger the output, the more variable input required to produce additional units. Called the _____ effect, this leads to a ______ average _____ cost.
A) spreading; lower; fixed
B) spreading; higher; fixed
C) diminishing returns; lower; variable
D) diminishing returns; higher; variable

Question

Quizplus · Accepted Answer

The diminishing returns effect states that as more units of a variable input are added to a fixed input, the additional output from each new unit of input eventually decreases, leading to higher average variable costs.

The Larger the Output, the More Variable Input Required to Produce