In production economics, what principle states that adding more of one variable factor to fixed factors eventually yields smaller increases in output?
Answer and explanation
Correct answer: C. Law of diminishing marginal returns
- Step 1: The law of diminishing marginal returns states that employing additional units of a variable input while holding other inputs constant eventually leads to decreasing additions to total output. Answer: Law of diminishing marginal returns. Why not the others: Comparative advantage concerns trade specialization, supply and demand sets market price, and the law of one price relates to currency arbitrage.
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