Final answer:
The phenomenon where adding more resources results in reduced efficiency is known as diminishing returns, a principle of the law of diminishing returns which states that marginal benefits decline as additional increments of resources are used in production.
Step-by-step explanation:
The situation described in the question wherein adding more resources results in inefficiencies is known as diminishing returns. According to the law of diminishing returns, when additional increments of resources are applied to the production of a good or service, there comes a point where the marginal benefit, or increase in output, obtained from these additional resources starts to decline. This describes the principle that, whilst initially, productivity can increase with the addition of new inputs, it will eventually reach a stage where the added cost of resources exceeds the value of the extra product being created, causing inefficiencies.
Diminishing returns can often be observed in various production and organizational processes. For example, in agriculture, adding fertilizer to a crop can initially increase the yield significantly, but after a certain point, further additions may produce a negligible increase, or even damage the crop. In a manufacturing setting, hiring more workers might increase production up to a point, but as the workspace becomes overcrowded, each new worker’s contribution to output may become smaller, eventually leading to inefficiencies.