The law of diminishing returns begins to operate when the
The law of diminishing returns begins to operate when the
- A) Total product begins to rise
- B) Total product begins to fall
- C) Marginal product begins to rise
- D) Marginal product begins to fall
Correct Answer: B) Total product begins to fall
Explanation
The law of diminishing returns is a concept in economics that explains what happens when additional resources are added to production. This law states that after a certain point, adding more resources will lead to smaller increases in output. The question is asking when this law begins to operate.
The options are:
- Total product begins to rise
- Total product begins to fall
- Marginal product begins to rise
- Marginal product begins to fall
The correct answer is Option B: Total product begins to fall. This means that when additional resources are added to production, the total output will begin to decrease instead of increasing after a certain point. This is due to the fact that the marginal product of each additional resource starts to decrease.
For example, let's say a factory has 10 workers and produces 100 units of a product per day. If the factory hires 5 additional workers, they may be able to produce 50 more units, making the total output 150. However, if the factory hires another 5 workers, they may only be able to produce 30 more units, making the total output 180. At this point, the law of diminishing returns is starting to take effect because the additional resources are not resulting in the same level of output increases.
It is important to note that this law only applies in the short run and assumes that some factors of production are fixed. In the long run, all factors of production can be adjusted, so the law of diminishing returns may not be as relevant.
To learn more about this, please read the relevant sections of the recommended textbooks.