Diminishing marginal returns is a concept that states as more units of a variable input (like labor) are added to a fixed input (like capital), the additional output produced by each additional unit of the variable input will eventually decrease. In other words, there comes a point where adding more of a resource leads to smaller increases in output.
Marginal Product: Marginal product refers to the change in total output resulting from using one additional unit of input while keeping other inputs constant.
Law of Diminishing Returns: The law of diminishing returns states that as more units of a variable input are added to fixed inputs, beyond a certain point, the marginal product will start decreasing.
Total Product: Total product is the overall quantity or amount of output produced by all units of inputs used in production.
AP Microeconomics - 3.1 The Production Function
AP Microeconomics - 3.2 Short-Run Production Costs
A firm experiences diminishing marginal returns when it hires additional workers. How might the firm overcome this challenge and increase its production efficiency?
When a firm is experiencing diminishing marginal returns, what happens to the MR and MC?
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