📚 Learning Guide
Marginal Returns and Labor Supply
easy

If hiring one worker increases output significantly, and hiring a second worker still increases output but less than the first, then hiring a third worker will likely lead to output increases that are: A:B :: D:?

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Choose the Best Answer

A

Even greater than the second

B

Equal to that of the first worker

C

Increasing but at a decreasing rate

D

No increase at all

Understanding the Answer

Let's break down why this is correct

Answer

When hiring workers, we often see that the first worker brings a big boost in output because they can start using the tools and resources available. The second worker still helps, but their contribution isn't as large as the first because they might be sharing tasks or space. This idea is called diminishing marginal returns, meaning that as we add more workers, each additional worker contributes less to the overall output than the one before. So, if we hire a third worker, we can expect their increase in output to be even smaller than the second worker's, following the same pattern. For example, if the first worker increases output by 10 units, and the second by 7 units, the third might only add 4 units.

Detailed Explanation

When you add more workers, each one helps less than the last. Other options are incorrect because Some might think each worker adds more output than the last; It's a common mistake to think each worker will add the same amount of output.

Key Concepts

Diminishing marginal returns
Labor supply and productivity
Input-output relationship
Topic

Marginal Returns and Labor Supply

Difficulty

easy level question

Cognitive Level

understand

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