Chapter 13R, Problem 6MCQ

To determine

The correct option that defines the level of input at which firm realizes the diminishing marginal returns.

Answer to Problem 6MCQ

Option b is correct.

Explanation of Solution

Explanation for correct option:

b.

At 4 workers, the production should be 40 if 1 worker is producing output of 10 but the output produced is 36. For instance, if 1 labor is producing 10 products then it does not mean that 6 labor will produce 60 products. Therefore, option b is correct

Explanation for incorrect options:

a.

Diminishing marginal returns are present in the given case. Therefore, option a is incorrect.

c.

At 3 workers, the output produced is 30 which is appropriate. At this level firm will not realize the diminishing marginal returns if 3^rd worker is added. Therefore, option c is also incorrect.

d.

At 5 workers, the additional output is 4 which is less as compared to the output level when 4^th worker is added to the firm. Therefore, option d is incorrect.

e.

At 6 workers, the additional output is 3 which is less as compared to the output level when 5^th worker is added to the firm.. 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.