Question

Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed sized plant because

A. adding more workers exhausts the possible gains from specialization.
B. less efficient and less productive workers are hired.
C. each worker will produce more than the worker previously hired.
D. the plant becomes less specialized.
E. the entrepreneur does not know how to manage more workers.

Answer 1

A) adding more workers exhausts the possible gains from specialization.

Step-by-step explanation:

When a worker specializes in a certain task, they will become more productive and efficient in performing the task. Worker specialization takes a long time, so it only applies in the long run.

In the short run when a company wants to increase its output, it cannot rely on worker specialization since they don't have the time to wait, they must hire more workers.