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  1. If the marginal returan encrease at a diminishing rate, the total return
    1. increases
    2. decreases
    3. remains constant
    4. becomes income
Correct Option: B

The question talks about marginal return increasing at diminishing rate which, in reality, is diminishing marginal return. In economics, the law of diminishing returns states: “If increasing amounts of a variable factor are applied to a fixed quantity of other factors per unit of time, the increments in total output will first increase but beyond some point, it begins to decline”. Richard A. Bilas describes the law of diminishing returns as: “If the input of one resource to other resources is held constant, total output will increase but beyond some point, the resulting output increases will become smaller and smaller.” So as the marginal return increases at diminishing rate, the total return will eventually decrease.



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