As a firm hires more labor in the short run, the
A)level of total product stays constant.
B)output per worker rises.
C)extra output of an additional worker may rise at first, but eventually must fall.
D)costs of production are increasing at a fixed rate per unit of output.

Question

Quizplus · Accepted Answer

In the short run, as a firm hires more labor, the extra output of an additional worker may initially rise due to increasing specialization and division of labor. However, eventually diminishing marginal returns to labor sets in and the additional output produced by each additional worker gradually decreases, eventually leading to a negative slope in the total product curve. Therefore, choice C is the correct answer.

As a Firm Hires More Labor in the Short Run