Firms should not hire another worker if hiring that worker results in diminishing marginal returns.

Question

Quizplus · Accepted Answer

Diminishing marginal returns does not necessarily mean that hiring another worker is unprofitable; it simply indicates that each additional worker contributes less to output than the previous one. Firms should consider hiring additional workers as long as the extra output produced (marginal product) by the additional worker is greater than the cost of hiring them.

Firms Should Not Hire Another Worker If Hiring That Worker