State the law of diminishing returns. How do diminishing returns differ from diseconomies of scale? Be sure to define diseconomies of scale in your answer
What will be an ideal response?
The law of diminishing returns states that at some point, adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. The law applies in the short run when there is at least one fixed factor of production. Diseconomies of scale applies in the long run when a firm is free to vary all of its inputs. Diseconomies of scale exist when a firm's long-run average cost rises as it increases output.
You might also like to view...
Most economists agree that
a. fiscal policy is a more effective stabilization tool than monetary policy. b. it is difficult to time discretionary changes in macro-policy in a manner that will promote stability. c. monetary policy should focus on reducing unemployment, while fiscal policy should focus on the control of inflation. d. discretionary macro-policy can easily be instituted in a manner that will promote economic stability.
If expected inflation is constant, then when the nominal interest rate increases, the real interest rate
a. increases by more than the change in the nominal interest rate. b. increases by the change in the nominal interest rate. c. decreases by the change in the nominal interest rate. d. decreases by more than the change in the nominal interest rate.