Why is the presence of fixed inputs necessary for the law of diminishing returns?
The presence of fixed inputs is the foundation of the law of diminishing returns. If all inputs could increase as the firm chose, then there would never be diminishing returns. If one thinks of the law of diminishing returns as “too many cooks in the kitchen,” then the fixed input is the kitchen. If you could make the kitchen as big as you wanted, then there could never be too many cooks in the kitchen. The law of diminishing returns is relying on the fact that at least one of the inputs in production cannot change and the fact that it cannot change, limits the ability of the other inputs to produce. 6. How does a firm use input prices to choose between capital-intensive production and labor-intensive production? The firm examines the many different production technologies that exist. Some technologies use more labor and some use more capital. The firm then computes the cost of the technology by multiplying the cost of labor times the amount of labor used and multiplying the cost of ca
