Question

An important relationship between variable inputs and output in the short run is given by the law of diminishing marginal product (or returns). The law states that as more of a variable input, such as labor, is employed, _________.

1) the marginal product of the variable input decreases
2) the marginal product of the variable input increases
3) the total product of the variable input decreases
4) the total product of the variable input increases

Answer 1

The law of diminishing marginal product states that as more labor is employed, the marginal product of labor decreases due to fixed inputs in the short run.

Step-by-step explanation:

An important relationship between variable inputs and output in the short run, according to the law of diminishing marginal product, states that as more of a variable input, such as labor, is employed, the marginal product of the variable input decreases. This means that while initially, the marginal product might increase with additional labor, there comes a point where the marginal gain for each additional unit of labor starts to fall.

For example, in a barber shop, the addition of the first barber may increase the output significantly, but the increase in output will be less with each subsequent barber added. This occurs because there are fixed inputs, such as space and equipment, which cannot be changed in the short run, eventually leading to overcrowding and inefficiencies.