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Which of the following best describes the concept of diminishing marginal product of labor?

a) The idea that as more workers are added to a fixed amount of capital, the additional output produced by each additional worker will eventually decrease.

b) The idea that as more workers are added to a fixed amount of capital, the cost of producing each additional unit of output will increase.

c) The idea that as more workers are added to a fixed amount of capital, the additional output produced by each additional worker will continue to increase indefinitely.

d) The idea that as more workers are added to a fixed amount of capital, the total output produced by the firm will decrease.

Answer :

The idea that as more workers are added to a fixed amount of capital, each additional worker's contribution to output will eventually decline, encapsulates the concept of diminishing marginal product of labor. Hence the correct answer is option C

The concept of diminishing marginal product of labor is best described by option a), which states that as more workers are added to a fixed amount of capital, the additional output produced by each new worker will eventually decrease. In practical terms, for example, in a pizza manufacturing process with a fixed number of ovens (capital), initially, more workers can significantly increase production.

However, after a certain point, new workers begin to interfere with each other due to limited space and equipment, resulting in each additional hour of work contributing progressively less to overall output. This situation reflects diminishing returns due to a fixed capital setup. The Law of Diminishing Marginal Product is a fundamental principle of economics that plays out in the short run when capital is held constant while labor is varied.

Hence the correct answer is option C

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