Assume that employment increases by 3%.Holding all other factors constant,we know with certainty that which of the following will occur?

Question

Quizplus · Accepted Answer

An increase in employment by 3%, holding all other factors constant, implies that more labor is contributing to production. However, without a proportional increase in capital or improvements in technology, the additional labor is likely to contribute less to output on the margin, leading to an increase in output by less than 3%. This is due to diminishing returns to labor when other factors are held constant.

Assume That Employment Increases by 3