Concept:Diminishing returns sets in when marginal product,
MP, starts to fall while total product,
TP, continues to increase.
Explanation:The graph of the production function shows how total product changes as more of the variable input is employed.
Initially,
TP increases at an increasing rate.
At the point of diminishing returns, the
TP curve begins to rise at a decreasing rate.
This means each extra unit of the variable input now adds less to output than the previous unit, so
MP declines.
From the diagram, this change in the slope of the total product curve occurs at point
V.
After point
V, the law of diminishing returns operates.
Answer:Point
V (Option D).
