Marginal returns refer to the additional output gained from using one more unit of a resource, such as labor or capital, while keeping other resources constant. This concept is important in economics and helps businesses understand how to optimize their production processes. As more units of a resource are added, the marginal returns may initially increase, but eventually, they tend to decrease. This phenomenon is known as the law of diminishing marginal returns, which suggests that after a certain point, adding more of a resource will yield smaller increases in output.