Diminishing Returns
Written by Studio AM.
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Imagine adding workers to a kitchen while keeping its floor space and equipment fixed. The first few additions may help: one person prepares ingredients while another cooks. As more people arrive, however, they begin waiting for the same oven and crossing one another's paths. An extra worker may then add less output than the previous one.
Economists call this diminishing marginal returns. When one input increases while other relevant inputs remain fixed, the additional output from successive units may eventually decrease. Total output can still rise. What shrinks is the gain from the next unit, not necessarily the total produced.
A field offers another illustration. Extra fertilizer may initially raise the yield, but its effect depends on water, soil and other conditions. Once another constraint becomes important, more fertilizer may add little; excessive use can damage plants. The sequence is an illustration, not a claim that every field responds in exactly the same way.
The practical question is whether the next unit adds enough benefit to justify its cost. Gains need not rise proportionally with the input. Changing another constraint, such as adding equipment or improving the layout, can alter the comparison. Diminishing returns therefore does not mean that effort is useless or that an activity should always stop. It means paying attention to additional gains and to the conditions under which they are measured.
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Questions
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Question 1 of 4
What is the main idea of the passage?
The answer is A: With other inputs fixed, additional units may eventually produce smaller extra gains.
The passage distinguishes shrinking additional gains from falling total output and specifies that other relevant inputs stay fixed.
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Question 2 of 4
What does the passage say excessive fertilizer can do?
The answer is B: Damage plants
The field example says that excessive use can damage plants, while noting that responses depend on conditions.
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Question 3 of 4
If an extra worker adds fewer meals than the previous worker, what can be inferred?
The answer is A: Total meal production may still have increased.
A smaller positive addition still raises the total. Diminishing marginal returns concerns the size of the extra gain.
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Question 4 of 4
What does 'input' mean in this passage?
The answer is A: a resource used to produce something
Workers and fertilizer are inputs used to produce meals or crops. Output is what those activities produce.
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