Question

The total product curve:

Question options:

	a) will be downward sloping if there are diminishing returns to the variable input.
	b) will become horizontal when the marginal product of the variable input is constant.
	c) will become flatter as output increases if there are diminishing returns to the variable input.
	d) shows the relation between output and the quantity of a variable input for varying levels of the fixed input.

When a firm has diminishing marginal returns:

Question options:

	a) marginal product is always negative.
	b) total product falls because marginal product is falling and positive.
	c) marginal product is falling but is likely to still be positive.
	d) its output is falling.

Can anyone explain this? Thank you!

Answer 1

Ans: c) will become flatter as output increases if there are diminishing returns to the variable input.

Explanation:

The total product curve will become steeper as output increases if there are increasing returns to the variable input. But the total product curve will become flatter as output increases if there are diminishing returns to the variable input.

When there is an increasing returns to scale then the the total product will increase at an increasing rate whereas when there is diminishing returns to scale then the the total product will increase at a decreasing rate.

Ans: c) marginal product is falling but is likely to still be positive.

Explanation:

When the marginal product starts to fall then there will be diminishing marginal returns to scale.When the marginal product becomes negative then there will be negative returns in the production process. So we can conclude that when a firm has diminishing marginal returns then the marginal product is falling but is likely to still be positive.