Question

1. When the diminishing returns effect starts to set in:

a.) marginal productivity is falling and average productivity is rising

b.) marginal productivity is rising and marginal cost is rising

c.) marginal productivity is falling and marginal cost is rising

d.) increasing returns to scale are realized

Answer 1

1.

Since the diminishing returns effects starts when the Total products starts falling and in this situation both MP and AP both starts falling but MP falls more rapidly. At the same time the marginal cost starts rising.

Hence it can be said that When the diminishing returns effect starts to set in marginal productivity is falling and marginal cost is rising.

Hence option C is the correct answer.

C;marginal productivity is falling and marginal cost is rising