The production function is concave in labor because
A) the contribution to production of each additional unit of labor decreases.
B) the marginal product of labor is increasing.
C) the marginal product of capital is decreasing.
D) the labor demand is downward sloping.

Question

Quizplus · Accepted Answer

Concavity in production function means that the rate of increase in output decreases as we increase the level of labor input. In other words, the marginal product of labor decreases with each additional unit of labor. This is represented by a diminishing marginal product of labor curve which is downward sloping. Therefore, choice A is the correct answer. Choices B and C are incorrect because they describe scenarios that are opposite to the characteristics of a concave production function. Choice D is also incorrect because the slope of the labor demand curve is not directly related to the concavity of the production function.

The Production Function Is Concave in Labor Because