Question

Why is the marginal product of labor likely to increase initially in the short run as more of the variable input is​ hired?A. Initially workers are able to​ specialize, but after a certain number of workers have been​ added, gains from specialization will be exhausted and diminishing total returns will set in.B. The marginal product always increases as more labor is hired.C. Initially workers are able to​ specialize, but after a certain number of workers have been​ added, gains from specialization will be exhausted and diminishing marginal returns will set in.D. Initially firms are able to add additional capital for each worker hired.​ However, after a certain​ point, it becomes cost prohibitive to do so.

Answer 1

The correct answer is option C.

Step-by-step explanation:

The marginal product of labor, in the short run increases as more and more labor, is hired. This happens because in the short run, as the number of workers is increased, the workers are initially are able to specialize in their work.

But after some time, the gains from specialization are exhausted, then after that, the diminishing returns set in. So the increase in labor will no longer cause the marginal product of labor to increase.