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JAMB Economics 1993 Question 11

Question 11

Theory of Production

A firm faces diminishing returns when its

  1. A.total output diminishes
  2. B.average output diminishes
  3. C.marginal output diminishes
  4. D.marginal revenue diminishes
Show the answer and explanation

Answer: C (marginal output diminishes)

Explanation

Diminishing returns begin when each extra unit of the variable factor adds less output than the one before, i.e. marginal product falls.