Which of the following statements best summarizes the law of diminishing marginal returns?
A) In the short run, as more labor is hired, output diminishes.
B) In the short run, as more labor is hired, output increases at a diminishing rate.
C) In the short run, the amount of labor a firm will hire diminishes as output increases.
D) As more labor is hired, the length of time that defines the short run diminishes.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as more units of a variable input (such as labor) are added to a fixed amount of other inputs (such as capital), the marginal product of the variable input will eventually decrease, holding other inputs constant. This means that in the short run, as more labor is hired, output will increase, but at a diminishing rate. Choice A is incorrect because output does not necessarily diminish as more labor is hired, but rather increases at a decreasing rate. Choice C is incorrect because the amount of labor a firm hires is not necessarily related to output, but rather to the marginal product of labor. Choice D is incorrect because the law of diminishing marginal returns pertains to the short run period and does not involve changes in the length of time.

Which of the Following Statements Best Summarizes the Law of Diminishing