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Why do firms experience increasing marginal returns and then diminishing marginal returns?
Wiki User
∙ 12y ago
The short answer would be supply and demand. As demand for the firms increase, they will experience increasing returns. Likewise, as demand decreases, so do their returns.
Wiki User
∙ 12y ago
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What war the 3 stages of production?
Three stages of production are increasing marginal returns, diminishing marginal returns, and negative marginal returns.
What are the stages of production of a firm?
a]increasing marginal returns b]diminishing returns c]negative returns
What circumstances cause a firm to experience diminishing marginal returns?
As the number of new employees increases the marginal product of an additional employee will be less than the previous employee which can cause a firm to experience diminishing marginal returns.
What is a level of production in which the marginal production decrease with new investment?
diminishing marginal returns
What is a level of production in which the marginal production decreases with new investment?
diminishing marginal returns
Causes of increasing and diminishing returns?
Each additional worker has less and less tools and equipments to work with consequently , the productivity of marginal worker eventually decreases
What is increasing input with reduced output?
Diminishing returns.
Why does the production possibility curve decrease at increasing rate?
As more inputs of production are switched from the production of one good to another, their marginal output is decreasing (see: diminishing returns to capital).
Why is the production possibility curve bowed out from the origin of the curve?
Diminishing Marginal returns to capital and labor.
What is the law of diminishing returns?
the law of diminishing returns states that as a set of variable factors is added to a set of fixed factor, the marginal product and average product will first increase then eventually decrease
What happens to marginal cost after the point where it equals average variable cost?
Marginal Cost will keep increasing (have upward slope) because of the principle of diminishing marginal returns. The MC curve above the its intersection with AVC is the Supply Curve *because below minimum AVC, the firms stops production)
What level at which the marginal production goes up with new investment?
The level at which marginal production goes up with new investment is generally referred to as the point of diminishing returns. Beyond this point, each additional unit of investment yields a smaller increase in output or productivity. This occurs as resources become more scarce or inefficiently allocated, resulting in a decrease in the marginal return on investment.
