GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total output is constant
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Land is the factor kept constant
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The state of technical knowledge is unchanged
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Average output declines faster than marginal output
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Detailed explanation-1: -First of all, the law is based on the assumption that there is no change in the techniques of production. If the techniques of production undergo a change, in that case the efficiency of production would increase. Therefore, this law applies only if there is no change in the method of technology.
Detailed explanation-2: -Following are the assumptions in the law of diminishing marginal utility: The quality of successive units of goods should remain the same. If the quality of the goods increase or decrease, the law of diminishing marginal utility may not be proven true. Consumption of goods should be continuous.
Detailed explanation-3: -The law has following main assumptions: (1) One of the factors is variable while all other factors are fixed. (2) All units of the variable factor are homogeneous. (3) There is no change in the technique of production.