Question

If a production process faces diminishing marginal returns, which of the following is most likely?

A

marginal costs are constant

B

marginal costs are increasing

C

marginal costs are decreasing

D

marginal costs may increase and then eventually decrease

Answer 1

Ans. B. marginal costs are increasing.

When the firm is employed more additional variable factors of production ( such as labor ) with the fixed factor of production in the production process, then each additional variable factor leads to a diminishing returns and then total output increases with decreasing rate and marginal or additional cost of the variable factors of production increases.