The situation in which the marginal product of labour is greater than zero and declining as more labour is hired is called the law of:

Question

Quizplus · Accepted Answer

The statement describes the concept of diminishing marginal returns, which is characterized by an initial increase in output as more units of labour are added, but eventually leads to a decline in the marginal product of labour. This is a fundamental economic law that applies to all production processes, reflecting the reality of finite resources and imperfect efficiency. Choice A (negative returns to scale) refers to a situation where output decreases proportionally more than inputs increase, while B is specifically concerned with labour's productivity. Choice C (inverse return to labour) and D (demand) are not relevant to the given context.

The Situation in Which the Marginal Product of Labour Is