Table 2.3
-The firm depicted in Table 2.3 is facing diminishing returns because
A) capital and labor are both fixed.
B) capital and labor are both variable.
C) capital is fixed.
D) the number of workers can only be increased to 5.

Question

Table 2.3
-The firm depicted in Table 2.3 is facing diminishing returns because
A) capital and labor are both fixed. 
B) capital and labor are both variable. 
C) capital is fixed. 
D) the number of workers can only be increased to 5.

Quizplus · Accepted Answer

The firm is facing diminishing returns because capital is fixed. This means that the amount of capital (such as machinery or equipment) cannot be increased, which ultimately limits the productivity of labor. Increasing the number of workers will eventually lead to overcrowding of fixed capital, resulting in lower efficiency and output. Therefore, the best choice would be to use the existing capital efficiently and optimize the output with the available labor.

Table 2.3 -The Firm Depicted in Table 2.3 Is Facing Diminishing Returns