4.1.4.3 The law of diminishing returns and returns to scale

Question 1

Law of Diminishing Returns

Answer 1

as extra units of a variable factor are added to a given quantity of a fixed factor, the output from each additional unit of the variables factor will rise at 1st but will then eventually diminish

Question 2

Explain the Law of Diminishing Marginal returns

Answer 2

As you add workers they can specialize to increase output

Eventually the Input of extra workers decreases the amount of Output per worker due to the limited fixed resources

As each worker starts producing less and less additional Output The cost of those additional units of Output is rising

Question 3

Short Run

Answer 3

A time period where atleast one factor of production is fixed and cant be changed by the firm

Question 4

Long Run

Answer 4

A time period where all factors of production could be changed by the firm

Question 5

Marginal Returns

Answer 5

the additional quantity of output produced by adding one extra unit of input

Question 6

When is Marginal Returns likely to be high?

Answer 6

when the labor force is currently quite small

workers can more easily benefit from the division of labor and specialisation

Question 7

Total Returns

Answer 7

the quantity of output produced by a given quantity of inputs over a period of time