Case Study The Law Of Diminishing Marginal Returns

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6. The law of diminishing marginal returns means that, at a certain point, hiring an extra factor of manufacture causes a comparatively smaller increase in output. The law of diminishing marginal returns occurs in the short run when one factor is fixed (e.g. capital). If the variable factor of production is increased (e.g. labour), there comes a point where it will turn out to be less profitable and therefore there will eventually be a decreasing marginal and then average product. This is because, if the capital is stable, additional employees will eventually get in each other’s way as they are trying to increase production. Marginal cost of production must increase if the marginal product of a variable resources is decreasing because the…show more content…
Advertising might reduce economic well-being because it is costly, it manipulates people’s tastes and impedes competition by making products appear more different than they really are. For example, McDonald’s might advertise their products but it still depends on personal preferences whether to choose to buy the product or not. The products tend to come out differently from the advertisement compared to the reality. In this case, products that are used for illustration purposes. Advertising might increase economic well-being by providing useful information to consumers and fostering competition. In this case, McDonald’s offers set meals to the consumers. Therefore, the consumers have a variety of choices to choose which meal should they take. 8. Product differentiation is a development or incorporation of attributes which includes benefits, price, quality, styling, services and etc. that a product’s intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differentiating characteristics. One real example which a firm differentiate their product is Airstream. Airstream’s top competitors is…show more content…
While Jayco uses sustainability such as focused on cutting down waste and energy consumption. 9. Oligopoly is a markets with only a small number of sellers. Because there are less sellers, the key feature of oligopoly is the tension between cooperation and self-interest. The characteristics of an oligopoly market includes few sellers offering homogenous or standardized products, mutually dependent firms and low barriers to entry. There are few examples of oligopolistic industries which is smartphone operating system industry and automobile industry. In this case, smartphone operating system industry such as Andriod OS (Google Inc.) and Iphone Os / iOS (Apple). While for automobile industry, examples include Honda and Perodua. It can only be operated by bigger companies and every companies have different goals to achieve. These examples can be classified as oligopolies because it has limited amount of firms in the industry. Besides, it is most power held by few bigger firms, it offers differentiated goals and it has low barriers of

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