1. Diminishing marginal returns means: Select one: A. Total output will fall and
ID: 1133118 • Letter: 1
Question
1. Diminishing marginal returns means:
Select one:
A. Total output will fall and then rise as additional units of input are employed
B. that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs
C. that in order to increase output at a constant rate, the firm can add smaller and smaller quantities of the variable inputs and maintain production
D. None of the above.
2. Other things equal, if the prices of a firm's variable inputs were to increase:
Select one:
A. total cost, total variable cost, and total fixed cost would all increase.
B. one could not predict how costs of production would be affected.
C. total variable cost would increase but total cost and total fixed cost would be unchanged.
D. total variable cost and total cost would increase, but total fixed cost would be unchanged.
Explanation / Answer
1. The correct option is B. The diminishing marginal returns imply that to increase output by a constant ratio, the variable input must be increased by larger and larger amount with each subsequent increase in output.
2. The correct option is D. When price of variable input increases the total variable cost increases and also increases total cost.
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