Question

Diminishing marginal returns occurs because _____________.

• A. total output falls once too many workers are involved in the production process.
• B. as more laborers are hired, workers increasingly share use of other fixed inputs, and so their ability to be increasingly productive is limited
• C. the first laborers hired are the most qualified, but as the quantity of labor increases the firm draws from a less qualified pool of labor
• D. unemployment rates mean that qualified labour is more and more difficult to find as hiring of labour increases

Answer 1

Answer: (A)

total output falls once too many workers are involved in the production process.

Diminishing marginal returns to labour occurs when the marginal production starts to diminish with increase in the amount of labour used in the production process. This leads to increase in total production at a diminishing rate and a situation may come when the total output is maximized and then tends to fall.