Home » How does the law of diminishing marginal returns affect output?

How does the law of diminishing marginal returns affect output?

By increasing marginal costs higher than it would have been without the fixed factor being fixed.

The law of diminishing returns or in a broader way, the law of variable proportions, says that with one factor fixed, you to produce increase the output by one unit, the marginal unit, must increase the variable factor in a proportion higher, and to increase the output by the next next unit, you must use even more of the variable factor.

With prices given, the above statement implicitly tells us that the marginal cost of production will be higher than it would be if you could increase the quantity of the fixed factor, because the marginal efficiency of it would increase with more of the variable factor, so it would be better to reduce the amount of variable factor and increase the fixed.

For example, to increase the production in one unit, you must buy 3 units of factor A that is variable, and costs 10 dollars each one, and to increase the output in 2 units you must buy 8 units of factor A, with the same price, but suppose that you could increase the quantity of the fixed factor (that would mean that this factor of production is no longer fixed), you could increase increase the output in 2 with 3 units of A and now with 1 unit of B that costs 30 dollars, the cost would be smaller.

So, with marginal costs with the fixed factor will increase in a higher “velocity” without it the marginal costs would increase slowly. And with a given marginal revenue (expected) with less marginal costs, more output would be sold.

Show more







Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10