Question

When the law of diminishing returns begins to operate, the total variable cost curve begins to ____________.

• A. rise at an increasing rate
• B. rise at a decreasing rate
• C. fall at a decreasing rate
• D. fall at an increasing rate

Answer 1

The correct option is A rise at an increasing rate

Law of diminishing returns refers to the situation when adding more variable input such as labor to a fixed resource such as machinery, leads to falling productivity and thus it leads to average variable cost to rise as the additional wages paid to the new workers is not justified by the subtle or no increase in productivity. Thus the total variable cost curve begins to rise sharply.