In the context of resource allocation, what does 'diminishing returns' refer to? (2023)

1 question

The increase in output with each additional unit of input.
The decrease in output with each additional unit of input after a certain point.
The constant output regardless of input levels.
The equal contribution of all inputs to production.

1 item

Q: In the context of resource allocation, what does 'diminishing returns' refer to? (2023)

Solution: Diminishing returns refer to the decrease in output with each additional unit of input after a certain point, thus option 1 is correct.

Steps: 5

Step 1: Understand that 'resource allocation' means how we use our resources (like time, money, or materials) to produce goods or services.
Step 2: Know that 'diminishing returns' is a concept in economics.
Step 3: Realize that it describes a situation where adding more of one resource (like labor or capital) leads to smaller increases in output after a certain point.
Step 4: For example, if you have a garden and keep adding more workers, at first, you might get a lot more vegetables. But after a while, adding more workers will not help as much because there isn't enough space or tools for everyone to work efficiently.
Step 5: Therefore, diminishing returns means that after a certain point, each extra unit of input (like workers) results in less and less additional output (like vegetables).