Final answer:
When a firm experiences diminishing returns to labor, the marginal product of labor decreases as additional units of labor are added. This decline is attributed to factors like fixed capital and the increasing difficulty in coordinating more workers effectively.
Step-by-step explanation:
If a firm is experiencing diminishing returns to labor, this means that as more units of labor are added, the marginal product of labor is indeed decreasing. In the context of production, the marginal product of labor refers to the additional output generated by employing one more unit of labor. At the beginning of adding labor to a fixed amount of capital, the marginal product could rise because additional workers make better use of the available capital.
However, as more workers are added, the firm will eventually hit a point where each new worker contributes less to output than the previous one. This is due to limitations such as fixed capital and the efficiency of coordinating among more workers. Therefore, according to the concept of diminishing marginal productivity, the correct answer is 1) The marginal product of labor is decreasing.