Read the statement below carefully, and decide whether it is true or false. And then EXPLAIN...

Read the statement below carefully, and decide whether it is true or false. And then EXPLAIN your answer (whether "true" or "false").

When diminishing marginal returns starts occurring, the addition of successive units of a variable resource to a fixed resource will cause the firm’s production to diminish.

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Expert Solution

This statement is FALSE

Diminishing marginal returns means that when we increase our variable input keeping all other inputs fixed , Our Output will increase but will increase at a diminishing rate.We can also say this Diminishing marginal Return Means our Marginal Product will decrease. But As Marginal Product = dQ/dL Assuming L be variable Input. Hence As long as Marginal Product is positive whether diminishing or not dQ/dL is positive hence as variable input L increases our output will also Increase and If It is diminishing then output will increase but at a Diminishing rate. Also Note that Output will decrease when Marginal product is negative.

Hence, When diminishing marginal returns starts occurring, the addition of successive units of a variable resource to a fixed resource will cause the firm’s production to increase as long as Marginal product of the Input is positive and output will start diminishing when Marginal product of the Input is Negative.

Hence This statement is False

Rahul Sunny answered 1 year ago

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