The principle of diminishing returns does NOT apply to labor when all inputs are allowed to vary because:
A)a firm can build an additional production facility so each worker's share of the facility doesn't necessarily decrease.
B)eventually the marginal product of labor will begin to increase again.
C)a firm can fire inefficient workers.
D)None of the above,diminishing returns always apply.

Question

Quizplus · Accepted Answer

When all inputs are allowed to vary, a firm can adjust other inputs like capital (e.g., building additional facilities), so the principle of diminishing returns, which applies when only one input is varied, does not necessarily apply.

The Principle of Diminishing Returns Does NOT Apply to Labor