If production displays diminishing returns for all inputs, then:
A)it must also display constant returns to scale.
B)it must also display increasing returns to scale.
C)it must also display decreasing returns to scale.
D)total product need never decline.
E)any of the above might apply.

Question

Quizplus · Accepted Answer

Diminishing returns for all inputs means that as more of any input is used, the marginal product of that input will eventually decline. This implies that the total product will also eventually decline, so D is incorrect. Constant returns to scale (A) and increasing returns to scale (B) both require that the total product increases as all inputs are increased, which is not the case with diminishing returns. Decreasing returns to scale (C) is a possibility, as the total product will eventually decline as more inputs are used.

If Production Displays Diminishing Returns for All Inputs, Then