Once again, the law of diminishing returns is that within a given system of inputs, there comes a point where each additional input yields less and less outputs. Let me give you an example from my days as an auditor. As a manager/partner of a CPA firm, one of the questions that needed to be answered before accepting any new job was the firm's ability to handle the job with the given level of staff. After that, the key was to find an efficient use of resources (i.e., staffing) in order to produce the best mix of outputs.
For the writer, then, the law of diminishing returns can apply to taking on that one extra thing. Stretching yourself too thin can be spell the difference between productivity and abandonment.
For me, I faced this issue when someone in my local church said, "Hey, can you write a little something for this [Fill in the Blank]? It shouldn't take much."
Here's a rule of thumb to all my writing friends out there: When somebody who hasn't bled and cried over a piece of writing comes up and asks for your hand in a project that shouldn't take much time, that's your cue to say, "I appreciate the thought, but no thank you." While it would be nice to help out, a writer only has a fixed level of resources. Each addition to the writer's load only means something else has to give. Dirty Harry said it best: "A man's got to know his limitations."
The truth is, it doesn't have to be one more writing project. There are so many everyday issues that can eat up a writer's time. Too many projects--from work to family to social events to writing groups--all running at the same time can cripple the individual writer's productivity. And when the writing suffers, so does the story or the article or the novel.
Do you remember what Ranch Wilder ("Angels in the Outfield") said to his radio co-host? "Less is more." The same holds true for the writer. There comes a time when a writer has to dial things back, or at least learn to disappoint some people, in order to keep their writing life focused.
The Cost/Benefit Rule.