-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 2. If Silvio hires the 4th worker, the firm will experience ________ marginal returns.
A) diminishing
B) increasing
C) constant
D) zero

Question

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant 2. If Silvio hires the 4th worker, the firm will experience ________ marginal returns.
A) diminishing 
B) increasing 
C) constant 
D) zero

Quizplus · Accepted Answer

When Silvio hires the 4th worker, the additional output produced by this worker is less than the additional output produced by the previous worker, indicating diminishing marginal returns.

-Silvio's Pizza Is a Small Pizzeria