As Product Co. adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate
A) greater than 51.
B) equal to 51.
C) less than 51.
D) greater than 51 if the firm experiences diseconomies of scale.
E) none of the above.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns suggests that as more workers are added, the marginal product of labor will eventually decrease. This means that the increase in output from adding the fifth worker will be less than the increase from adding the fourth worker. Therefore, the output rate is likely to be less than 51.