Explore BrainMass

Explore BrainMass

    Diminishing Marginal Returns vs Tech Substitution

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What's the difference between the law of diminishing marginal returns and the law of diminishing marginal rate of technical substitution?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:39 pm ad1c9bdddf

    Solution Preview

    Law of Diminishing marginal returns
    A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee. Thus after a possible initial increase in marginal returns, the MPP of an input will fall as the total amount of the input rises (holding all other inputs constant). After some point of time additional labour will provide output less than the earlier labour.
    Thus diminishing marginal returns imply increase in marginal cost. This is shown in the downward sloping part of MPL curve. This is often explained as due to ...

    Solution Summary

    This explains the Diminishing Marginal Returns vs Diminishing Marginal Rate of Tech Substitution