Question

the law of diminishing returns
a. explains why marginal cost eventually increases as output expands.
b. implies that average fixed cost will remain unchanged as output expands.
c. is true for physical production activities but not for activities such as studying.
d. applies to a capitalist economy but would be irrelevant if the means of production were owned by the state.

Explanation:

The law of diminishing returns states that as more of a variable input is added to fixed inputs, marginal product (and thus marginal cost behavior is affected) will eventually decline. Average fixed - cost is not related to the law of diminishing returns as it is determined by the division of fixed cost by output. The law applies to production activities in general, not just capitalist economies or only physical production. It is a fundamental economic principle.

Answer:

None of the options are correct. The law of diminishing returns explains why marginal cost eventually increases as output expands because as more variable factors are added to fixed factors, the marginal product of the variable factors will decline, leading to higher marginal costs. So, if we assume the closest correct - like option, it would be a. explains why marginal cost eventually increases as output expands.