Explanation : The law of diminishing marginal returns states
that as more of a variable resource is combined
with a given amount of another resource,
marginal product eventually declines. The law
of diminishing marginal returns is the most
important feature of production in the short run.
Explanation : Step-1 : Higher of Municipal value and Fair Rent in this case it will be higher of 450,000 and 5,00,000, So it will be 5,00,000 (let us call it as A). Step 2 : Lower of A and Standard Rent so it will be lower of 5,00,000 and 4,80,000, So will be 4,80,000. (let us call it B) Step 3 : Higher of ‘B’ and Actual Rent, So it will be Higher of 4,80,000 and 4,20,000. So the GAV will be 4,80,000.