The correct answer is: D. Quantity of any one factor is fixed.
Diminishing returns is a concept in economics that states that in the short run, the marginal product of a factor of production will eventually decrease as the amount of that factor is increased, while the other factors are held constant.
In other words, if you keep all other factors of production the same and increase the amount of one factor, the amount of output will increase at first, but eventually it will start to increase at a slower rate and eventually will start to decrease.
This is because as you increase the amount of one factor, the other factors will become less and less productive. For example, if you have a farmer with one tractor and one field, the farmer can only plant so much corn. If the farmer buys another tractor, the farmer can plant more corn, but the farmer will eventually reach a point where the farmer can’t plant any more corn, no matter how many tractors the farmer has.
Diminishing returns can also occur in the long run, but it is more likely to occur in the short run because in the long run, businesses can adjust all of their factors of production, not just one.
A. Quantity of labor is fixed: This is one possible cause of diminishing returns, but it is not the only possible cause.
B. Quantity of output is fixed: This is not a possible cause of diminishing returns. Output is the result of production, and production is the result of using factors of production. If the quantity of output is fixed, then the quantity of factors of production must also be fixed, which means that diminishing returns cannot occur.
C. Quantity of capital is fixed: This is one possible cause of diminishing returns, but it is not the only possible cause.
In conclusion, the correct answer is: D. Quantity of any one factor is fixed.