What is the difference between "diminishing marginal returns" and "diseconomies of scale"? A. Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. B. Diminishing marginal returns which applies only in the short run, when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale which applies in the long run, when all factors are variable, explains why average cost increases.

A. Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.

Explanation:

Law of marginal returns states that as additional units are being produced or utilised there will be a reduction in the increase of output at a point. Only one factor is variable and other factors are assumed to be constant.

On the other hand returns to scale considers changes in a wide number of variables over the long run. It compares increase in total output as a result of total inputs. Returns to scale are of 3 types: constant returns to scale, increasing returns to scale, and decreasing returns to scale.

Decreasing returns to scale is the point where all inputs have been increased to a point where total output starts to reduce.

A. Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.

Explanation:

Diminishing marginal returns explains the outcome of increasing input in a short run by keeping one production variable constant, this variable could be labour or capital.

The law of diminishing marginal return states that when there is additional unit in any of the factors of productions and others are kept constant, there will be an initial decrease in incremental output per unit.

Economies of scale explains the effect of that will occur when variables inputs are increased in production on a long run, it explains the difference in increased total input against increase in output.

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