Which of the following explains why the law of diminishing marginal returns occurs?APer-units costs for a firm increase as the firm builds successively larger plant sizes.BSuccessive units of a good yield lesser amounts of satisfaction to consumers.CAdditional variable resources crowd fixed resources.DWhen a firm reduces price to increase sales, additional revenue to the firm is less than the price.EWhen the price of a product is reduced, total revenue falls.
Question
Which of the following explains why the law of diminishing marginal returns occurs?APer-units costs for a firm increase as the firm builds successively larger plant sizes.BSuccessive units of a good yield lesser amounts of satisfaction to consumers.CAdditional variable resources crowd fixed resources.DWhen a firm reduces price to increase sales, additional revenue to the firm is less than the price.EWhen the price of a product is reduced, total revenue falls.
Solution
The law of diminishing marginal returns occurs due to the reason C: Additional variable resources crowd fixed resources.
Here's a step-by-step explanation:
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The law of diminishing marginal returns is an economic concept that shows that there is a point at which an additional unit of input will not produce the same increase in output as before.
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This happens because, in the short run, at least one factor of production (like machinery or land) is fixed. This is known as a fixed resource.
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As a firm increases another factor of production (like labor), these additional variable resources will eventually become less productive because they have to share the fixed resources.
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For example, if a factory (fixed resource) hires more workers (variable resource), at some point each additional worker will contribute less to output because they have to share the same machinery and space. This is when the law of diminishing marginal returns occurs.
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Therefore, the statement "Additional variable resources crowd fixed resources" best explains why the law of diminishing marginal returns occurs.
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