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

-If labor is the only variable input, an increase in the quantity of labor:

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
 
-If labor is the only variable input, an increase in the quantity of labor:

Quizplus · Accepted Answer

According to the law of diminishing marginal returns, the output initially increases at an increasing rate as more workers are hired. This is because of the specialization and division of labor. However, after a certain point, the output increases at a decreasing rate because of the limited availability of other inputs like capital and land. Therefore, the best choice is D, which says that an increase in the quantity of labor causes the output to increase initially at an increasing rate and then at a decreasing rate.

The Below Figure Shows the Various Combinations of the Goods