1215

The law of diminishing returns states that at some point as:

A) less of a resource are devoted to production, holding the quantity of other inputs constant, the output will decrease, but at an increasing rate.

B) more of a resource is devoted to production, holding the quantity of other inputs constant, the output will increase, but at a decreasing rate.

C) more of a resource is devoted to production, holding the quantity of other inputs constant, at some point output will begin to decrease.

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At low levels of output, increasing marginal returns will exist corresponding to the downward sloping portion of the marginal cost curve. As marginal costs begin to increase diminishing marginal returns will occur.

1215

Which of the following is least accurate with regard to the long-run and the short-run?

A) In the short run, only plant size is fixed.

B) Long-run cost curves pertain to plants of different sizes.

C) In the long-run, all costs are variable.

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In the short-run, labor is major variable cost. Plant size, in addition to technology and equipment, are fixed.

1215

Based on the concept of diminishing returns, as the quantity of output increases, the short-run marginal costs of production eventually:

A) rise at an increasing rate.

B) fall at a decreasing rate.

C) rise at a decreasing rate.

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The law of diminishing returns states that as more variable resources are a production process combined with a fixed input, output will eventually increase at a decreasing rate. In the short run, as the quantity produced rises, costs rise at an increasing rate.