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What is meant by diminishing returns to a factor? Why does it occur ?

Answer»

Solution :DIMINISHING returns to a factor is the PHASE of production wherein as more and more units of avariable factor are employed the MP decreases with each additional unit of employment.
(i) Over-utilisation of the FIXED factor.
(II) Imperfect Substitution of FACTORS.
(iii) Poor Coordination.


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