When the 7th worker is hired,output increases from 100 units per week to 110 units per week.When the 8th worker is hired,output increases from 110 units to 118 units.This is an example of
A)diminishing marginal returns.
B)diminishing marginal cost.
C)decreasing returns to scale.
D)labour-intensive production.
E)increasing returns to scale.

Question

Quizplus · Accepted Answer

This scenario is an example of diminishing marginal returns, as the addition of the 7th worker increases output by 10 units per week, but the addition of the 8th worker only increases output by 8 units per week. This indicates that each additional unit of labor is contributing less and less to overall output, which is a key characteristic of diminishing marginal returns.

When the 7th Worker Is Hired,output Increases from 100 Units