The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3

-After hiring a new employee, a manager finds that the total output has increased. When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case. This is the result of:

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
 
-After hiring a new employee, a manager finds that the total output has increased. When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case. This is the result of:

Quizplus · Accepted Answer

This situation is a classic example of diminishing marginal returns, which occurs when adding more of a variable input (like labor) to a fixed input (like capital) results in a smaller increase in output. This is often due to limited resources or inefficiencies in the production process, resulting in a decrease in productivity for each additional unit of input.

The Below Figure Shows the Various Combinations of the Goods