What is the law of diminishing returns? Give an example of what the law of diminishing returns implies
What will be an ideal response?
The law of diminishing returns is the observation that as the quantity of one input increases with the quantities of all other inputs remaining the same, output increases but by ever smaller increments. Hence, as more workers (or capital) are used by a firm, each additional worker (or unit of capital) increases output, but by less than previous worker (or unit of capital). For instance, a law firm might have one paralegal typing briefs on one personal computer. Hiring an additional paralegal will increase the number of briefs, but with only one personal computer, the additional paralegal will not double the number of briefs. Similarly, buying another computer, while employing only one paralegal, might increase the number of briefs typed, but will not double the number.
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In the short run, a firm will eventually experience rising per-unit costs because of:
a. economies of scale. b. diseconomies of scale. c. the law of supply. d. the law of diminishing returns.
Define the following terms and explain their importance to the study of macroeconomics:
a. aggregation b. recession c. gross domestic product d. final goods and services e. stabilization policy
In which year did GDP growth in Greece fall below -6 percent?
A. 2003 B. 2009 C. 2005 D. 2011
The impact of technological change in the health care area has been to
A. increase the quality of health care while decreasing the costs. B. increase both the quality of health care and the costs of health care. C. reduce the quality of health care while raising the costs. D. reduce the cost of health care.