Final answer:
The marginal product of labor tends to decrease as additional workers are hired due to the presence of fixed capital and diminishing marginal productivity, leading to a decline in the MPL per new worker added. Option 3 is correct answer.
Step-by-step explanation:
The marginal product of labor (MPL) is a concept in economics that represents the additional output generated by adding one more unit of labor, holding all other inputs constant. Based on the information provided and the principles of production, it's clear that the MPL tends to decrease as more labor is used due to the presence of fixed capital, a concept known as diminishing marginal productivity.
This phenomenon occurs because, with a fixed amount of capital, there is only so much additional efficiency or productivity that new workers can bring to the production process before they start getting in each other's way or run out of equipment to use, leading to a decline in the MPL for each new worker added.
According to Figure 14.2, as the employer hires additional workers, there is a diminishing return on the extra output produced because the amount of capital is fixed. So, while initial increases in labor can significantly boost production, continual additions will yield progressively smaller increases in output.
This fundamental principle does not directly relate to the product price--the MPL can decline even if product prices remain the same or increase. Similarly, increasing the amount of capital employed does not necessarily equate to a reduced MPL, as it's the relative ratio of labor to capital that matters, not the absolute amount of capital used. Therefore, the correct option for the marginal product of labor is that it declines as more labor is used, reflecting the standard production function dynamics in a firm with fixed capital.