Question

Ricardo's theory of rent was formulated on the basis of ___________________.

• A. the law of diminishing returns
• B. the law of increasing returns
• C. the law of constant returns
• D. the law of diminishing marginal utility

Answer 1

Answer: (A)

the law of diminishing returns

Ricardo's theory of rent was formulated on the basis of the law of diminishing returns.

Law of diminishing returns states that when the total output initially increases with an increase in the variable input at a given quantity of fixed output but it starts decreasing after a given point of time.

The amount of labour employed for the cultivation of land is rewarded by yielding produce which is many more times than the labour involved.