What is meant by returns to a factor? State the law of diminishing returns to a factor.
Returns to a factor It refers to the behaviour of output when only one variable factor of production is increased in short-run and fixed factors remain constant.
Law of diminishing returns to a factor It refers to a situation in which total output increases at a diminishing rate when more and more variable factor is combined with the fixed factor of production. In this situation, Marginal Product of the variable factor must be diminishing.