Author Question: What is the law of diminishing returns? Why is this proposition called a law? What will be an ... (Read 48 times)

Garrulous · **on:** Jun 29, 2018

What is the law of diminishing returns? Why is this proposition called a law?

What will be an ideal response?

Question 2

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above its marginal revenue curve.

Indicate whether the statement is true or false

Natalie4ever · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The law of diminishing returns states that as a firm uses more of a variable factor, with a given quantity of fixed factors, the marginal product of the variable factor eventually decreases. This proposition is called a law because there is no case where adding more labor, capital, materials, fuel or any other variable factor will cause output to increase indefinitely. Eventually, adding any variable factor to some fixed factor will lead to smaller and smaller additions to output. If the law of diminishing returns did not always hold true, farmers could grow the entire world's supply of food on one acre of land, by just adding more water and more fertilizer (variable factors) to the acre (the fixed factor).

Answer to Question 2

FALSE