In the context of Marginal Revenue Product Analysis, how does the principle of diminishing returns affect a firm's decision to hire additional workers for profit maximization?

In Marginal Revenue Product Analysis, the principle of diminishing returns means that as a firm hires more workers, each additional worker contributes less to overall production after a certain point. Initially, adding workers can increase output significantly, but eventually, the benefits start to decline because there are only so many resources, like machines or space, for everyone to use. For example, if a factory has ten machines and hires ten workers, each worker can use a machine, maximizing productivity. However, if the factory hires more workers beyond that, they may have to wait to use the machines, leading to less efficient work and lower profit. Therefore, firms carefully consider how many workers to hire, aiming to balance costs with the revenue generated from their production to maximize profits.