Comment on the following statements: “Diminishing returns occur when total output falls as additional units of labour are combined with fixed inputs in the production process”.

The above statement is not true because it is talking about a situation of negative product. However, diminishing returns occur when the marginal product declines which means the total product is increasing but at a decreasing rate. This refers to the second stage in the law of variable proportions. Initially, with every increase in input the output produced increases. But in the second stage eventually, since one factor is assumed to be constant the production process starts becoming too crowded which leads to a decline in the productivity levels. Therefore, the marginal product begins to fall.