Learning Path
Question & Answer1
Understand Question2
Review Options3
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Explore TopicChoose the Best Answer
A
increasing marginal returns
B
constant returns to scale
C
diminishing marginal returns
D
negative returns
Understanding the Answer
Let's break down why this is correct
Answer
As we add more units of a variable input, like labor, to a fixed input, such as machinery, we initially see an increase in output. However, there comes a point where adding more labor leads to smaller increases in output. This is known as diminishing marginal returns. For example, if you have one machine and you keep adding workers, the first few workers can greatly increase production, but eventually, each new worker will contribute less because they start to crowd the machine or run out of space to work efficiently. In simple terms, while more workers can help, too many can actually slow things down.
Detailed Explanation
When you add more of one thing, like workers, to something that doesn't change, like machines, each new worker helps less than the last. Other options are incorrect because Some might think that adding more workers always makes more output; Constant returns suggest that adding more input always gives the same output.
Key Concepts
Diminishing Marginal Returns
Production Efficiency
Resource Allocation
Topic
Diminishing Marginal Returns
Difficulty
easy level question
Cognitive Level
understand
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