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3. The law of diminishing returns establishes that a) while reducing the amount of capital, the...

3. The law of diminishing returns establishes that

a) while reducing the amount of capital, the added production per additional unit is reduced.

b)while the amount of capital increases, the added production per additional unit is increased.

c) while reducing total average costs in the long term, production increases.

d)while the amount of capital increases, the production added per additional unit is reduced.

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Answer #1

3. The law of diminishing returns establishes that (d) while the amount of capital increases, the production added per additional unit is reduced.

As per the law of diminishing returns, a unit addition of one factor of production (in our case it is capital), while all other factors remain constant, yields decreased per-unit incremental returns from the additional capital.

Basically it implies, when increasing one factor of production causes the marginal product of additional factor is smaller than the marginal product of the previous factor at some point.

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