📚 Learning Guide
Diminishing Marginal Returns
easy

Which of the following scenarios best illustrates the principle of diminishing marginal returns in production?

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Choose the Best Answer

A

A farmer increases the number of workers on a fixed plot of land, but each additional worker contributes less to total output than the previous one.

B

A factory installs new machinery that increases production efficiency drastically.

C

A restaurant adds more items to its menu, resulting in higher customer satisfaction.

D

A software company hires more developers, and each new hire significantly boosts project delivery speed.

Understanding the Answer

Let's break down why this is correct

Answer

Diminishing marginal returns is a concept in economics that describes how adding more of one factor of production, while keeping others constant, will eventually yield lower increases in output. For example, imagine a farmer who grows corn on a fixed piece of land. If he starts by adding more workers, the corn production increases significantly at first. However, after a certain point, if he keeps adding more workers without expanding the land, each new worker contributes less to the total yield because they start to get in each other's way. This shows that while more workers can help, there’s a limit to how much they can increase production when the land size stays the same.

Detailed Explanation

When a farmer adds more workers to a fixed piece of land, each worker helps less than the one before. Other options are incorrect because This option suggests that new machines greatly improve production; Adding more menu items can increase customer happiness, but it doesn't show diminishing returns.

Key Concepts

Diminishing Marginal Returns
Production Efficiency
Resource Allocation
Topic

Diminishing Marginal Returns

Difficulty

easy level question

Cognitive Level

understand

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