Question

In: Economics

Which situation is most likely to exhibit diminishing marginal returns to​ labor? A. A factory that...

Which situation is most likely to exhibit diminishing marginal returns to​ labor?

A.

A factory that hires more workers and never increases the amount of machinery

B.

A factory that increases the amount of machinery and holds the number of workers constant

C.

A factory that obtains a new machine for every new worker hired

D.

None of these situations will result in diminishing marginal returns to labor.

Solutions

Expert Solution

Hence the correct answer is (A) A factory that hires more workers and never increases the amount of machinery

In general a Law of diminishing returns If we increase one input(here labor) and keeping other inputs constant(here Machine) then there comes a situation when if we hire more labor then marginal productivity of additional labor must decline.

Hence in this situation if we keep machinery constant then additional output produced by additional labor(Marginal Product Of Labor) must decline

Hence According to Law of diminishing returns option (A) is correct.

Rahul Sunny answered 2 years ago
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