When a production function exhibits a diminishing, but positive, marginal product of labor,

A. output increases, but at an increasing rate, as more workers are employed.

B. output increases, but at a decreasing rate, as more workers are employed.

C. output declines as more workers are employed.

D. the effects on marginal product are ambiguous.

Question

Business

Karli Ramos

7 January, 22:41

When a production function exhibits a diminishing, but positive, marginal product of labor,

A. output increases, but at an increasing rate, as more workers are employed.

B. output increases, but at a decreasing rate, as more workers are employed.

C. output declines as more workers are employed.

D. the effects on marginal product are ambiguous.

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Answers (1)

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Jenna Wilkerson · Answer 1

Answer: The correct answer is "B. output increases, but at a decreasing rate, as more workers are employed.".

Explanation: This happens by the law of diminishing (marginal) returns, increasing the amount of a productive factor in the production of the good or service in question, causes the production yield to be lower as we increase this factor. As long as all other factors are maintained at a constant level (ceteris paribus).