Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases
B
It decreases
C
It remains the same
D
It fluctuates unpredictably
Understanding the Answer
Let's break down why this is correct
Answer
When a firm increases the use of labor while keeping capital constant, the marginal revenue product of labor can change, especially if the inputs are substitutes. This means that as more workers are hired, each additional worker may contribute less to the firm's overall output because they have to share the same amount of capital. For example, imagine a factory with a fixed number of machines; if more workers are added, they might not all be able to use the machines efficiently, leading to diminishing returns. As a result, the value generated by each additional worker may decrease, which means the marginal revenue product of labor falls. Therefore, while increasing labor can initially boost productivity, too much labor without enough capital can lead to reduced efficiency.
Detailed Explanation
When a firm uses more workers and keeps machines the same, each worker can help more. Other options are incorrect because Some might think that adding workers makes each one less useful; It's a common mistake to think that adding workers doesn't change anything.
Key Concepts
Input Substitutability
Topic
Calculating Marginal Revenue Product
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.