If the wage rate is constant and diminishing marginal returns have already set in, then
A)the wage rate must increase.
B)marginal cost increases.
C)marginal cost decreases.
D)the wage rate must decrease.

Question

Quizplus · Accepted Answer

When diminishing marginal returns set in, it means that adding more of a variable input (e.g., labor) to a fixed input (e.g., machinery) leads to smaller increases in output. If the wage rate is constant, the cost of adding an additional unit of labor remains the same, but the additional output generated by that labor decreases. Therefore, the cost of producing each additional unit of output (marginal cost) increases.

If the Wage Rate Is Constant and Diminishing Marginal Returns