Question

The law of diminishing return is based on the assumption that:

• A. The techniques of production remain constant.
• B. It is applicable only in the short run.
• C. The proportions between factors are fixed.
• D. Both (A) and (B)

Answer 1

The correct option is D Both (A) and (B)

The law of diminishing returns is based on the following assumptions:

1. There is no change in the technique of production-This is because if there is change in the production technique then efficiency will increase.
2. It is only applicable in the short run - as the supply of factors cannot be changed in a short period hence they are fixed.