A factory initially hires one worker, leading to a significant increase in output. As the factory hires additional workers, it notices that the output gain from each subsequent worker is reduced. Which category best describes this phenomenon?

The phenomenon described is known as "diminishing marginal returns. " This means that while adding more workers initially increases the factory's output significantly, each new worker contributes less to the overall production than the previous one. For example, if the first worker helps produce 10 units of goods, the second might only add 8 units, and the third could add just 5 units. This happens because the factory has limited resources, like machines and space, which can only be used effectively by a certain number of workers at a time. As more workers are added, they may get in each other's way or not have enough equipment, leading to less additional output for each new worker.