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The law of diminishing returns assumes:
Question

The law of diminishing returns assumes:

A.

There are no variable factors of production

B.

Some factors of production are fixed

C.

Utility is maximized when marginal product falls

D.

There are no fixed factors of production

Correct option is B

The law of diminishing returns assumes that as additional units of a variable input are added to fixed inputs, the marginal output eventually decreases. This concept requires some factors of production to remain fixed. Without fixed factors, this principle does not apply.

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