The correct answer is: C. Law of increasing return
The law of increasing returns is a principle of economics that states that in the short run, a firm can increase its output by increasing the amount of one input (e.g. labor) while holding all other inputs constant, and the marginal product of that input will increase. In other words, the firm can produce more output with the same amount of inputs, or it can produce the same amount of output with fewer inputs.
The law of increasing returns is often explained by the idea of specialization. When a firm increases the amount of one input, it can specialize that input in a particular task. This specialization can lead to increased efficiency and productivity.
The law of increasing returns is not always true. In some cases, a firm may experience diminishing returns as it increases the amount of one input. Diminishing returns occur when the marginal product of an input declines as the amount of that input increases.
The law of increasing returns is an important concept in economics. It can help firms to understand how to increase their output and efficiency. It can also help governments to understand how to promote economic growth.
The other options are incorrect because they do not accurately describe the law of increasing returns.
- Option A, the law of constant return, states that in the short run, a firm’s output will increase at a constant rate as it increases the amount of one input. This is not always the case, as firms can experience increasing or diminishing returns.
- Option B, the law of diminishing return, states that in the short run, a firm’s output will increase at a decreasing rate as it increases the amount of one input. This is a more accurate description of the law of increasing returns.
- Option D, the law of supply of production, states that the quantity of a good that producers are willing and able to supply will increase as the price of that good increases. This is a different concept from the law of increasing returns.