In general, diminishing returns occur:
a. as output expands in the early part of production.
b. as output expands at higher levels of output.
c. through the entire range of production.
d. when marginal product is rising.
To determine when diminishing returns occur, we need to look at the concept of marginal product. Marginal product refers to the additional output that is obtained when one additional unit of input is added while keeping all other inputs constant.
Diminishing returns occur when adding more units of input leads to a proportionately smaller increase in output. In other words, the marginal product of each additional input decreases.
Now let's analyze the answer options:
a. As output expands in the early part of production: This is not correct. In the early stages of production, it is common to experience increasing marginal returns, where each additional unit of input leads to a greater increase in output.
b. As output expands at higher levels of output: This is the correct option. Diminishing returns typically occur when production reaches higher levels, meaning that adding more units of input results in a relatively smaller increase in output.
c. Through the entire range of production: This is not correct. While diminishing returns occur at higher levels of output, it does not mean that they continue all the way through the entire range of production. Initially, there may be increasing marginal returns, followed by diminishing returns, but eventually, productivity may start declining due to negative marginal returns.
d. When marginal product is rising: This is not correct. Diminishing returns occur when the marginal product of each additional input starts to decrease, not when it is rising.
Therefore, the correct answer is b. Diminishing returns occur as output expands at higher levels of output.