Question: Which of the following statements best illustrates the concept of diminishing returns in resource allocation?

Options:

1. Increasing the number of workers in a factory leads to a proportional increase in output.
2. Adding more fertilizer to a crop field results in a smaller increase in yield over time.
3. Investing in technology always leads to higher productivity.
4. Resource allocation should always prioritize financial returns.

Correct Answer: Adding more fertilizer to a crop field results in a smaller increase in yield over time.

Solution:

Diminishing returns occur when adding more of a resource results in a smaller increase in output, which is illustrated by option 1.