Table 7.1 Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 7.1.Diminishing marginal returns sets in when the ________ worker is hired.
A)2nd
B)3rd
C)4th
D)None of the above; the production function displays increasing marginal returns.

Question

Table 7.1  Table 7.1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May.
-Refer to Table 7.1.Diminishing marginal returns sets in when the ________ worker is hired.
A)2nd 
B)3rd 
C)4th 
D)None of the above; the production function displays increasing marginal returns.

Quizplus · Accepted Answer

Diminishing marginal returns sets in when the 3rd worker is hired, as the total product starts to increase at a decreasing rate from this point onwards. Hiring the 4th worker actually reduces the total product, indicating negative marginal returns. Therefore, the optimal level of labor would be hiring 2 or 3 workers.

Table 71 Table 7