What happens as a firm hires more labour in the short run?
A)Level of total product stays constant.
B)Output per worker rises.
C)Extra output of another 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 another worker may increase at first but eventually must fall due to the law of diminishing marginal returns. This means that the additional output produced by each additional unit of labor will eventually decrease. Therefore, option C is the best choice. Options A and D are incorrect because the level of total product may increase with additional labor initially, and costs of production may not be increasing at a fixed rate per unit of output. Option B is also incorrect because output per worker may not necessarily rise in the short run, as it depends on the level of output and the efficiency of the labor force.

What Happens as a Firm Hires More Labour in the Short