Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

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Quizplus · Accepted Answer

The law of diminishing marginal returns states that as more and more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. Hence, producing the first 50 units of output required 30 employee-hours. However, to produce an additional 50 units of output will not require the same amount of employee-hours. Instead, it will require more than 30 additional employee-hours because the marginal product of the variable input (employee-hours) has decreased. Therefore, to produce 100 units of output, it will require more than 30 additional employee-hours.

Suppose 30 Employee-Hours Can Produce 50 Units of Output