Increasing marginal returns occur when the
A) average product of an additional worker is less than the average product of the previous worker.
B) marginal product of an additional worker exceeds the marginal product of the previous worker.
C) marginal product of labor is less than the average product of labor.
D) total output of the firm is at its maximum.
E) total product curve is horizontal.

Question

Quizplus · Accepted Answer

Increasing marginal returns occur when each additional worker produces more output than the previous worker. This is equivalent to saying that the marginal product of labor is increasing. Therefore, choice B is correct. Choices A and C describe situations where marginal returns are decreasing, while choice D is not necessarily true since total output can still increase even after marginal returns have started to decrease. Choice E is not relevant to the concept of marginal returns.

Increasing Marginal Returns Occur When the