Question

In a manufacturing plant with no labor, adding labor increases output and marginal product. However, at some point increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline, because there will simply not be enough space for so many workers to work. This is an example of the law of _________ returns.

Answer 1

The Law of Diminishing Marginal Product states that adding labor to a manufacturing plant will initially increase output and marginal product, but at some point, increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline. This law is a characteristic of production in the short run.

Step-by-step explanation:

Marginal product is the additional output of one more worker. Adding labor in a manufacturing plant initially increases output and marginal product. However, at some point, increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline, which is called the Law of Diminishing Marginal Product. This is a characteristic of production in the short run and occurs because of fixed capital.