Chapter 13R, Problem 5MCQ

To determine

The correct option that defines the consequences if marginal product is positive and falling if more workers are hired by the firm.

Answer to Problem 5MCQ

Option a is correct.

Explanation of Solution

Explanation for correct option:

a.

If marginal product is positive and falling if more workers are hired then in such case the total product will increase but it will increase at declining rate. In other words, the total output will be more if more workers are hired but it will not increase at same rate. For instance, if 1 labor is producing 10 products then it does not mean that 6 labor will produce 60 products. Therefore, option a is correct

Explanation for incorrect options:

b.

Total product increases as the firm hires more labor but not at the same rate. Therefore, option b is incorrect.

c.

Average product generally increases as more labor are added to the firm. Therefore, option c is also incorrect.

d.

Marginal revenue product of labor is also decreasing as the firm is hiring more labor which will incur cost. Therefore, option d is incorrect.

e.

Diminishing returns to labor happens as the additional labor is hired. The output level produced by the additional worker will be declining. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Factor income: Factor income refers to returns received by the producer for inserting each factor of production as an input.