If additional unit of a variable factor input causes a fall in the marginal product,...
ECONOMICSJAMB 2016
If additional unit of a variable factor input causes a fall in the marginal product, this implies that
- A. Total product starts declining
- B. Average product has become zero
- C. Diminishing returns has set in
- D. Increasing returns is operating
Correct Answer: C. Diminishing returns has set in
Explanation
diminishing returns is the decrease in the marginal output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.
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