Diminishing marginal returns refer to a concept in economics where the addition of more units of a variable input (such as labor or capital) leads to smaller increases in output. In other words, as more units of a variable input are employed, the additional output generated by each additional unit of the input decreases. This concept is based on the law of diminishing marginal returns.

Understanding the relationship between diminishing marginal returns and marginal cost is crucial to answering this question correctly.

Diminishing marginal returns and marginal cost:
- Diminishing marginal returns directly impact marginal cost. As the additional output generated by each additional unit of the variable input decreases, the marginal cost of producing that output increases. This is because more resources are needed to produce the same additional output.
- The law of diminishing marginal returns states that as more units of a variable input are added, the total output will eventually increase at a decreasing rate. This means that the marginal cost of each additional unit of output will increase.

Explanation of options:
a) Decreasing average variable cost: Diminishing marginal returns do not necessarily imply decreasing average variable cost. Average variable cost is the total variable cost divided by the quantity of output produced. While diminishing marginal returns may lead to an increase in average variable cost, it does not guarantee a decrease.

b) Decreasing marginal cost: Diminishing marginal returns do not imply decreasing marginal cost. As mentioned earlier, diminishing marginal returns actually lead to an increase in marginal cost. This is because more resources are required to produce each additional unit of output.

c) Increasing marginal cost: This is the correct answer. Diminishing marginal returns do imply increasing marginal cost. As more units of the variable input are employed and the additional output generated decreases, the marginal cost of producing that output increases.

d) Decreasing average fixed cost: Diminishing marginal returns do not necessarily imply decreasing average fixed cost. Average fixed cost is the total fixed cost divided by the quantity of output produced. While diminishing marginal returns may lead to an increase in average fixed cost, it does not guarantee a decrease.

Conclusion:
Diminishing marginal returns imply increasing marginal cost. As the additional output generated by each additional unit of the variable input decreases, more resources are required to produce that output, leading to higher marginal costs. It is important to understand the relationship between diminishing marginal returns and marginal cost to correctly answer this question.