In the short run, why does a production function eventually display diminishing returns to labor?
A)As the number of workers increases, it becomes difficult to monitor them.
B)As a firm hires more workers, the skills and the work ethic of the additional workers will eventually decline.
C)As the number of workers increases, eventually the gains from the division of labor and specialization are used up.
D)The opportunity cost of hiring additional workers must eventually rise.

Question

Quizplus · Accepted Answer

As more workers are added, the gains from the division of labor and specialization are eventually used up, leading to diminishing returns to labor. This is because each additional worker has less and less specific skills, knowledge and experience to contribute to production. Eventually, workers start to get in each other's way, decreasing productivity and causing diminishing returns to labor.

In the Short Run, Why Does a Production Function Eventually