In the short run, marginal product of labour increases at first and then falls because

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as the variable input (labour) is added to a fixed input (capital), the marginal product of the variable input will eventually decrease. In the short run, initially, the marginal product of labour increases because of the gains from specialization and division of labour. However, as more workers are added, there are fewer opportunities for specialization, and the marginal product of labour starts to decline. Therefore, option B is the correct choice as it explains the reason why the marginal product of labour falls in the short run.

In the Short Run, Marginal Product of Labour Increases at First