Which concept describes the diminishing benefits received from increasing the input of one production factor?

The concept that describes the diminishing benefits received from increasing the input of one production factor is the Law of Diminishing Returns. This law applies in a production context where, after a certain point, adding more of one input while holding other inputs constant will yield progressively smaller increases in output.

For instance, if a farmer keeps adding fertilizer to a fixed amount of land, there will be a point at which the extra fertilizer does not lead to proportionate increases in crop yield. Initially, the benefits may be significant, but as more fertilizer is added beyond an optimal level, the additional output generated by each extra unit of fertilizer decreases. This principle is crucial in economics, as it helps to explain the limitations in production processes and assists in making decisions regarding resource allocation.

The other concepts listed, such as the Law of Supply and the Law of Demand, pertain to market behavior rather than the relationship between input factors and output. Marginal Utility Theory relates to consumer preference and satisfaction rather than production inputs. Understanding the Law of Diminishing Returns is essential for managing resources effectively and optimizing production levels.