Question: What does the term \'diminishing returns\' imply in the context of resource allocation? (2023)

Options:

1. Increasing resource input leads to proportionally higher output.
2. After a certain point, adding more resources results in smaller increases in output.
3. Resources should be allocated equally to maximize output.
4. All resources must be utilized to achieve maximum efficiency.

Correct Answer: After a certain point, adding more resources results in smaller increases in output.

Exam Year: 2023

Solution:

Diminishing returns imply that after a certain point, adding more resources results in smaller increases in output, highlighting the need for careful resource allocation.