If a firm is experiencing diminishing marginal returns to labor, which of the following must be true?
A)The first workers the firm hired were better than the workers hired later on.
B)The firm is experiencing decreasing returns to scale.
C)The positive effect of specialization in production is being offset by the negative effect of crowding of inputs.
D)Output is decreasing.
E)The firm should buy more nonlabor inputs.

Question

Quizplus · Accepted Answer

Diminishing marginal returns to labor occur when adding more workers leads to a smaller increase in output, often due to overcrowding or inefficiencies in production.

If a Firm Is Experiencing Diminishing Marginal Returns to Labor