Diminishing return occurs in short run when there is a reduction in the

Diminishing return occurs in short run when there is a reduction in the

Answer Details

Diminishing returns occurs in the short run when there is a reduction in the marginal product of the variable factor. In other words, when the additional output that is produced by adding one more unit of the variable factor, such as labor or capital, decreases. This is due to the limited capacity of the fixed factors, such as land, buildings, and equipment. As more and more variable factors are added, the fixed factors become more and more congested, leading to inefficiencies and a reduction in the marginal product of the variable factor.