Question

There is no difference between the law of diminishing marginal returns and the law of diminishing...

There is no difference between the law of diminishing marginal returns and the law of diminishing marginal rate of technical substitution. True or False. Explain and offer examples to further illustrate your explanation.

Homework Answers

Answer #1

The statement is False

Law of diminishing marginal returns refers to the decline in marginal productivity when one more labor is hired to increase the output such as when the firm hires 1 additional labor,total output will increase at a decreasing rate whereas Law of diminishing marginal rate of technical substitution refers to the rate at which the firm substitutes two inputs used in the production to maintain the output at the same level such as when the firm substitutes labor and capital to maintain the same output level.

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