If the law of diminishing returns applies to labor then:
A) the marginal product of labor must eventually become negative.
B) the average product of labor must eventually become negative.
C) the marginal product of labor must rise and then fall as employment rises.
D) the average product of labor must rise and then fall as employment increases.
E) after some level of employment, the marginal product of labor must fall.

Question

Quizplus · Accepted Answer

The law of diminishing returns states that as additional units of a variable input (such as labor) are added to a fixed input (such as capital), the marginal product of the variable input will eventually decrease. This means that after some level of employment, the additional output produced by each additional unit of labor will begin to decrease, leading to a fall in the marginal product of labor. Therefore, option E is the correct answer.

If the Law of Diminishing Returns Applies to Labor Then