the law of diminishing returns

Question 1

what is the law of diminishing returns?

Answer 1

the law of diminishing returns is a short term law which states that as a variable factor of production is added to a fixed factor of production, eventually the marginal and average returns for the variable factor of production will begin to fall

Question 2

what are the assumptions of the law of diminishing returns?

Answer 2

the assumptions of the law of diminishing returns:

• it is a short term law, so at least one factor of production is fixed
• each unit of variable factor is the same

Question 3

which factor of production is usually fixed?

Answer 3

the factor of production which is usually fixed is land

Question 4

what is an example of all variable factors being the same?

Answer 4

an example of a factor being the same is labour - each worker is equally trained

Question 5

what is the problem with the law of diminishing returns?

Answer 5

the problem with the law of diminishing returns is that it assumes that all variable factors of production are the same, however, they vary.
for example, labour productivity varies