When the quantity of labor is increased substantially without increasing the amount of capital, the ﬁrm experiences _____.

Question

Quizplus · Accepted Answer

When the quantity of labor is increased substantially without a corresponding increase in the amount of capital, the firm typically experiences diminishing returns. This is because, beyond a certain point, each additional unit of labor contributes less to output than the previous unit, given the fixed amount of capital.

When the Quantity of Labor Is Increased Substantially Without Increasing