Exhibit 7-2

-Given the information in Exhibit 7-2, at what point do diminishing marginal returns set in?
A) before the first unit of labor
B) between the first and second units of labor
C) between the second and third units of labor
D) between the third and fourth units of labor
E) between the fourth and fifth units of labor

Question

Exhibit 7-2
 
-Given the information in Exhibit 7-2, at what point do diminishing marginal returns set in?
A) before the first unit of labor 
B) between the first and second units of labor 
C) between the second and third units of labor 
D) between the third and fourth units of labor 
E) between the fourth and fifth units of labor

Quizplus · Accepted Answer

Diminishing marginal returns set in between the second and third units of labor as the total output increases by a smaller amount (from 16 to 21) compared to the increase in labor input (from 2 to 3). After this point, the marginal product of labor decreases.

Exhibit 7-2 -Given the Information in Exhibit 7-2, at What Point Do