Question

What is the concept of diminishing returns?

1) A concept in economics that states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease.
2) A concept in biology that states that as more small fish are added to a pond, the overall fish population will decrease.
3) A concept in mathematics that states that as the value of a variable approaches infinity, the value of the function will approach a finite limit.
4) A concept in physics that states that as the distance between two objects increases, the gravitational force between them decreases.

Answer 1

The concept of diminishing returns states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. It is a key concept in economics and can be observed in various industries.

Step-by-step explanation:

The concept of diminishing returns is a key concept in economics. It states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. In other words, the additional benefit or output gained from each additional unit of input will diminish over time.

For example, imagine a factory that produces cars. Initially, as more workers are hired, the production of cars increases at an increasing rate. However, at some point, adding more workers becomes inefficient, and the additional cars produced by each additional worker start to decrease. This is an example of the law of diminishing returns.