Question

What should a firm do once it realizes it is in a situation with a diminishing marginal product? The firm – stop producing additional units. If marginal product is –, the firm should continue production if it can sell the output for more than the – costs.

Answer 1

Answer: the firm should continue production if it can sell the output for more than the – costs.

Explanation: In simple words, diminishing marginal returns refers to a situation in which employing an additional unit of input will result in increase in output but with a less marginal benefit.

The firm should continue to produce as the overall profit will be high till the cost is less than the revenue.