Diminishing marginal product of labor occurs when:
A) adding another unit of labor increases output, but not by as large a margin as the last unit of labor employed.
B) the average product of labor begins to rise.
C) adding another unit of labor increases output by a larger margin than the last unit of labor employed.
D) all inputs are varied simultaneously in the same proportion.

Question

Quizplus · Accepted Answer

Diminishing marginal product of labor occurs when adding more units of labor leads to a smaller increase in output compared to the previous unit of labor added. In other words, the additional output gained by hiring an extra worker is decreasing as more workers are hired, indicating diminishing returns to labor. Therefore, choice A is the correct answer. Choice B is incorrect because the average product of labor is a measure of output per worker, which is not directly related to marginal product. Choice C is incorrect because a larger increase in output with each additional worker would suggest increasing marginal product of labor. Choice D is irrelevant because it does not address the concept of diminishing marginal product of labor.

Diminishing Marginal Product of Labor Occurs When