Why is the law of diminishing marginal returns justified?

Question

Shouldn't it be easier to produce more quantity of goods for a producer? Isn't it the case that the ease of production is inherently tied to the quantity you produce? Shouldn't it be the case that the more you produce , the more easier it becomes to produce a bit more? I understand why the marginal cost drops for lower quantities but am not sure why it should steadily climb up if the quantity crosses some threshold.

Of course , the fixed costs and variable costs as a result of increase in quantities produced could play a local effect in the increasing marginal cost but I don't see why in general the marginal cost curve seems to be increasing by the argument that it should be easier to produce a bit more when you are already producing a lot.

Answer 1

Marginal product can be constant, increasing or diminishing depending on Returns to Scale (also called Economies of scale). If Returns to Scale is constant, it means that each extra unit of product/output takes one extra unit of input. In this case, marginal product will be constant. In other words, the efficiency of production is constant.

However, take the case of increasing Returns to Scale, which is usually seen in the real world in a typical factory. In this case, one extra unit of product takes less than one extra quantum of cost inputs. In such a case, the firm has high fixed costs as compared to variable costs and said to possess an operating leverage (in financial terms). And, the efficiency of production increases. Same inputs produce higher outputs.

Example: a software company selling products has high fixed costs and close to zero variable costs. So, selling one extra copy of software can happen at a much lower increase in inputs. This is however, till you reach the ceiling where you have to employ additional fixed cost resources to generate the next item of product. Say, when the next version/iteration of the software has to be produced, it would need additional fixed cost resources to develop it.

So, yes it isn't necessary that marginal product will always have a diminishing curve.

Answer 2

Diminishing return

Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Produce a bit more may be less cost. If you increase a single resource at some point you get less productivity per unit.

Long term if the whole process is designed to produce more then cost per item should go down.

Answer 3

Shouldn't it be easier to produce more quantity of goods for a producer?

No. At some point, staff is overworked and machines overheat. Even if it were indefinitely easier to increase the quantity of goods produced, nothing guarantees that there will be demand for the entire production.

Additionally, progressive taxation, and oversupply of goods have a detrimental effect on producer's profit. These factors are not strictly related to ease of production, but to your question as to

Why is the law of diminishing marginal returns justified?

Furthermore, the sole fact that consumers experience a diminishing marginal utility precludes the possibility that a producer will be able to sell its entire production no matter how much he raises his levels of output.