The law of diminishing returns a. explains why marginal cost eventually increases as output expands. b. implies that average fixed cost will remain unchanged as output expands. c. is true for physical production activities but not for activities such as studying. d. applies to a capitalist economy but would be irrelevant if the means of production were owned by the state.

Answer: a. The law of diminishing returns explains why marginal cost eventually increases as output expands.

The law of diminishing returns, also known as the principle of diminishing marginal returns, is an economic concept stating that, when at least one input (factor of production such as labor or capital) is held constant, there will come a point where the addition of more of a variable input (like labor hours) will produce smaller and smaller increments of output. Initially, as more units of the variable input are added, total output may increase at an increasing rate; but eventually, it will increase at a decreasing rate.

This happens because, as more of the variable input is utilized, it is combined with a constant amount of the other inputs, and the contribution of each additional unit of the variable input becomes less impactful. As a result, to produce each additional unit of output, more and more input is needed, which drives up the cost of producing each additional (or marginal) unit of output—hence, marginal cost increases.