A firm has a given amount of capital.When it hires 10 workers,output is 30.When it hires 11 workers,output is 40.If the Law of Diminishing Returns applies,which of the following is the most likely amount of output when the firm hires 12 workers?

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Quizplus · Accepted Answer

The Law of Diminishing Returns states that as more units of a variable input (like labor) are added to fixed inputs (like capital), the additional output from each new unit of input will eventually decrease. In this scenario, going from 10 to 11 workers increases output from 30 to 40, a gain of 10 units. If the Law of Diminishing Returns applies, the next worker (the 12th) would add less than 10 units to the output, making 45 the most likely amount of output, as it is less than the previous increase and follows the pattern of diminishing returns.

A Firm Has a Given Amount of Capital