Figure 6.2
-The situation pictured in Figure 6.2
A) is one of increasing marginal returns to labor.
B) is one of increasing marginal returns to capital.
C) is consistent with diminishing marginal product.
D) contradicts the law of diminishing marginal product.
E) shows decreasing returns to scale.

Question

Figure 6.2
-The situation pictured in Figure 6.2
A) is one of increasing marginal returns to labor. 
B) is one of increasing marginal returns to capital. 
C) is consistent with diminishing marginal product. 
D) contradicts the law of diminishing marginal product. 
E) shows decreasing returns to scale.

Quizplus · Accepted Answer

As more labor is added in the short run, the additional output (marginal product) initially increases, but eventually starts to decrease. This is consistent with the law of diminishing marginal product, which states that as more of one input is added while holding all other inputs constant, the marginal product of the variable input will eventually decrease. Therefore, the situation in Figure 6.2 shows diminishing marginal product.

Figure 6.2 -The Situation Pictured in Figure 6.2