For a perfectly competitive firm, the value of marginal product diminishes as employment increases because the
A) marginal product decreases as the firm's production increases.
B) marginal revenue decreases as the firm's production increases.
C) price falls as the firm's production increases.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The value of marginal product diminishes as employment increases primarily because the marginal product of labor decreases with an increase in the quantity of labor. This is a reflection of the law of diminishing marginal returns, which states that as more of a variable input (like labor) is added to a fixed amount of other inputs (like capital), the additional output produced by the additional input eventually decreases.

For a Perfectly Competitive Firm, the Value of Marginal Product