Which situation is most likely to exhibit diminishing marginal returns to labor?
A)a factory that obtains a new machine for every new worker hired
B)a factory that hires more workers and never increases the amount of machinery
C)a factory that increases the amount of machinery and holds the number of workers constant
D)None of these situations will result in diminishing marginal returns to labor.

Question

Quizplus · Accepted Answer

In situation B, as more workers are hired without an increase in machinery, each additional worker has less machinery to work with, leading to a decrease in the productivity of each additional worker, which is a classic example of diminishing marginal returns to labor.

Which Situation Is Most Likely to Exhibit Diminishing Marginal Returns