Diminishing marginal returns implies that firms:
A. require fewer and fewer workers to produce each additional unit of output.
B. require more and more workers to produce each additional unit of output.
C. get decreasing amounts of revenue for each unit of output they produce.
D. get increasing amounts of revenue for each unit of output they produce.
Answer: B
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Many art galleries keep 60% of the sale price of a painting. However, art galleries do not typically pay the artist while the painting hangs on the wall. This form of contingency contract may be efficient if
A) the artist is less risk averse than the gallery. B) the gallery is less risk averse than the artist. C) the artist is unable to diversify across galleries or paintings. D) the gallery is unable to diversify across artists of paintings.
If 14 workers produce a total of 25 cabinets and 15 workers produce a total of 30 cabinets,
a. the marginal product of the fifteenth worker is 2 cabinets b. the marginal product of the fifteenth worker is 5 cabinets c. the marginal product of the fifteenth worker is 30 cabinets d. the marginal product of the fifteenth worker is $5 e. diminishing returns begins with the fifteenth worker
As government becomes larger and larger as a share of the economy, economic growth is likely to decline because
a. taxes are reduced to levels that are inconsistent with economic efficiency. b. governments are involved in many activities for which they are ill-suited. c. tax-transfer activities are reduced and sometimes virtually eliminated. d. governments do not spend enough on the provision of key public goods like education.
________ exist when the average cost of production by one firm becomes smaller as the rate of output increases
a. Diminishing marginal returns b. Diseconomies of scale c. Economies of scale d. Decreasing returns to scale