Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed sized plant because
A) less efficient and less productive workers are hired.
B) adding more workers exhausts the possible gains from specialization.
C) the entrepreneur does not know how to manage more workers.
D) each worker will produce more than the worker previously hired.
E) the plant becomes less specialized.

Question

Quizplus · Accepted Answer

Adding more workers to a fixed sized plant leads to a point where the gains from specialization are exhausted and each additional worker adds less to output than the previous worker. This is known as decreasing marginal returns. Other options are not the likely reasons for decreasing marginal returns.

Decreasing Marginal Returns Occur in the Short Run as More