Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Marginal Product of Labor increases as more labor is hired, regardless of other factors.
B
Businesses can optimize their resource allocation by comparing the marginal product of labor with its wage.
C
The Marginal Product of Capital should be assessed against its rental price for effective investment decisions.
D
Diminishing returns imply that adding more units of labor will always increase total output.
E
Marginal Product Analysis is irrelevant when evaluating fixed costs.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal Product Analysis is a way to understand how adding one more unit of a resource, like labor or equipment, affects the total output. When we talk about marginal product, we mean the extra output gained from using one additional unit of input. For example, if a bakery employs one more baker and produces 10 more loaves of bread, the marginal product of that baker is 10 loaves. This analysis helps businesses decide if it’s worth hiring more workers or buying more machines based on how much additional product they can create. Therefore, the true statements about Marginal Product Analysis will focus on how it measures changes in output and helps in making efficient production decisions.
Detailed Explanation
Other options are incorrect because Many think that more workers always mean more output; Some believe comparing worker output to their pay is always clear.
Key Concepts
Marginal Product Analysis
Resource Allocation
Diminishing Returns
Topic
Marginal Product Analysis
Difficulty
medium level question
Cognitive Level
understand
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