The Law of Diminishing Returns describes what phenomenon?

• A. Adding More of a Variable Input Yields Smaller Gains Over Time
• B. Gains Increase Exponentially With More Input
• C. Inputs Have No Effect on Output
• D. Outputs Always Increase Linearly

Answer: (A)

The law of diminishing returns says that when you add more of a variable input to a production setup with some inputs fixed, output still rises, but the extra output from each new unit of input gets smaller as you keep adding. Early on, more inputs can boost production a lot, but as you pile on more, fixed resources like machinery, space, and management become limiting, so each additional unit contributes less and less.

This is why the described phenomenon—smaller gains over time—best captures the concept. The idea that gains grow exponentially would be about increasing returns, which isn’t what happens here. Saying inputs have no effect on output contradicts the basic idea that changing inputs changes output, even if only a little. And claiming outputs always increase linearly ignores the diminishing rate at which output increases as inputs rise.