Please explain why the law of diminishing returns applies only in the short-term period.

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The law of diminishing returns states that, in the short term, the profit to be gained from a particular product or process decreases after a certain level of investment, either of money or energy. It refers to the point at which the money or energy (or both) invested into a given set of products or processes is greater than the amount that these things give back. This law sets a maximum amount that a given set of economic units is worth over a certain interval of time.

This law only applies in the short-term, or, to be more specific, over a definite period of time, but in the indefinite sense, it does not hold true. The classic example I have read in economic textbooks to demonstrate the law of diminishing returns in a common-sense kind of way is the "toothpaste" scenario. When you go out to the store to buy toothpaste, how many tubes do you buy? Most people buy one, or some might buy two so that they...

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