In the short run, why does a production function eventually display diminishing returns to labour?
A)As the number of workers increases, it becomes difficult to monitor them.
B)As a firm hires more workers, the skills and the work ethic of the additional workers will eventually decline.
C)As the number of workers increases, eventually the gains from the division of labour and specialisation are used up.
D)The opportunity cost of hiring additional workers must eventually rise.

Question

Quizplus · Accepted Answer

Initially, as more workers are hired and the division of labour is increased, output per worker increases, leading to increasing returns to labour. However, at some point, the gains from specialisation and division of labour are exhausted, and adding more workers does not lead to a proportional increase in output. This is the point of diminishing returns to labour.

In the Short Run, Why Does a Production Function Eventually