Law of Diminishing Marginal Returns
The term marginal refers to a small change starting from some baseline level. Marginal product turns negative. Pin On Economics Law of diminishing returns firmly manifests itself. . Therefore producers prefer Stage II the stage of diminishing returns. But bear in mind that the concept of marginal product of labor is subjected to the law of diminishing marginal returns. Marginal Product With every additional input the increase in the total product is referred to as the marginal product. Concerning the law of diminishing returns only one factor at a time is considered. The law is based on the ordinal utility theory and requires certain assumptions to hold. Here total product starts diminishing. In this stage no firm will produce anything. Marginal revenue is the revenue generated for each additional unit sold relative to marginal cost MC. The law of diminishing marginal returns states that employing an addit...
