Explain the concept of diminishing returns.
What will be an ideal response?
The principle of diminishing returns shows that in the short run, beyond some point, output will increase at a decreasing rate. For example, producing more output in an existing production facility by increasing the number of workers sharing the facility will bring into effect the principle of diminishing returns, as output will eventually increase but at a decreasing rate.
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Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ________ and the long-run elasticity as being ________.
A. inelastic; unit elastic. B. elastic; inelastic. C. elastic; elastic. D. inelastic; elastic.
A lawn mower costs $500 in the US and 8188 Mexican Pesos in Mexico. The current exchange rate is 1USD=12.97MXN. At this rate,
a. The good costs more in the US b. The good costs more in Mexico c. The good costs the same across the two countries d. None of the above
Which of the following events did not contribute to the high rate of savings and loan failures in the 1980s and 1990s?
a. The bankruptcy of the FDIC b. Deregulation of the banking industry that allowed investment houses to compete with banks and S&Ls for depositors c. The elimination of Regulation Q d. The entry of S&Ls into riskier loan markets e. Substantial fraud in lending activities
Which of the following is not an example of government's role as an actor?
A. Social security tax cuts that reduce the percentage paid by employees B. Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want C. Increases in social security spending D. Laws that require states and the federal government to balance their budgets