Question

The law of returns refers to

• A. The amount of extra output secured by adding to a fixed input, more and more variable inputs
• B. The amount of extra output secured by adding to variable inputs and marginal inputs
• C. The amount of extra profit secured by adding to a fixed input, more and more variable inputs
• D. None of these

Answer 1

The correct option is A The amount of extra output secured by adding to a fixed input, more and more variable inputs

Under the law of returns one factor is variable while others are kept constant.

With the additional unit of the variable factor the marginal productivity of variable factor increases at a diminishing rate also the marginal output will increase at a diminishing rate.