The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3

-Assume that one laborer produces 6 units of output, two laborers produce 14 units, three laborers 22 units, four laborers 24 units, and five laborers 25 units. Diminishing returns set in when the firm hires:

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
 
-Assume that one laborer produces 6 units of output, two laborers produce 14 units, three laborers 22 units, four laborers 24 units, and five laborers 25 units. Diminishing returns set in when the firm hires:

Quizplus · Accepted Answer

Diminishing returns set in when the fourth laborer is hired, as the additional production only increases by 2 units (from 22 to 24). Hiring the fifth laborer only increases production by 1 unit, which is not worth the additional cost. Therefore, the firm's best choice is to hire four laborers.

The Below Figure Shows the Various Combinations of the Goods