Over a five-year span,the ABC Co.reduced the amount of labor it hired.At the same time,the marginal productivity of labor increased.Which of the following COULD explain this observation?
A) the law of diminishing marginal returns
B) labor saving technical change
C) organizational innovation
D) All of the above.

Question

Quizplus · Accepted Answer

All of the listed options (the law of diminishing marginal returns, labor saving technical change, and organizational innovation) could explain why the ABC Co. reduced the amount of labor it hired while experiencing an increase in marginal productivity. It is possible that the law of diminishing marginal returns occurred, meaning that as the company hired more labor, the additional output from each worker decreased. Alternatively, labor saving technical change or organizational innovation could have led to increased productivity, allowing the company to produce the same amount with less labor or to produce more with the same amount of labor.

Over a Five-Year Span,the ABC Co