Learning Path
Question & Answer1
Understand Question2
Review Options3
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Explore TopicChoose the Best Answer
A
It suggests that hiring more workers will always increase output indefinitely.
B
It indicates that after a certain point, adding more workers will increase output at a decreasing rate.
C
It implies that increasing fixed inputs will always lead to higher marginal returns.
D
It shows that labor is the only factor affecting production efficiency.
Understanding the Answer
Let's break down why this is correct
Answer
The principle of diminishing marginal returns means that as a firm adds more workers to a fixed amount of resources, the extra output produced by each additional worker will eventually start to decrease. For example, if a bakery has one baker, adding a second baker might significantly increase the number of loaves of bread made. However, if a third or fourth baker is added, they might get in each other's way, and the extra loaves produced by these new bakers will be less than the previous ones. This principle influences a firm's decision on labor employment because they must consider how many workers will be most productive without wasting resources. If a firm hires too many workers, they may not see enough benefit to justify the cost of those additional employees.
Detailed Explanation
This principle means that after hiring a certain number of workers, each new worker adds less to total output. Other options are incorrect because This idea suggests that more workers always mean more output, which isn't true; This option thinks that just adding more tools or machines will always help.
Key Concepts
Diminishing Marginal Returns
Production Efficiency
Labor Economics
Topic
Diminishing Marginal Returns
Difficulty
medium level question
Cognitive Level
understand
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