In the context of Marginal Product Analysis, how does the Law of Diminishing Returns affect a firm's decision on resource allocation when aiming for profit maximization?

The Law of Diminishing Returns tells us that when a firm keeps adding more of one resource, like labor, while keeping other resources constant, the extra output produced by each additional worker will eventually start to decrease. This means that after a certain point, hiring more workers might still increase production, but each new worker contributes less and less to total output. For example, if a factory has one machine and adds workers, the first few might greatly increase productivity, but eventually, too many workers will crowd the space and slow down work. Because of this, firms must carefully decide how many resources to allocate to maximize profits, aiming to find the balance where the cost of adding more resources is less than the value of the extra output produced. If they ignore this law, they risk wasting money on resources that do not significantly increase their profits.