Question

Which statement describes a situation in which negative returns to labor occur. a.The total product of labor peaks. b.The marginal product of labor begins to fall. c.The marginal product of labor falls below zero. d.The average product of labor begins to fall.

Answer 1

Correct option is (c)

Step-by-step explanation:

Marginal product of labor refers to change in output as a result of an additional unit of labor employed. Now the law of diminishing marginal returns state that as more and more unit of labor input is employed, output increases but at a diminishing rate.

Now, if more units are employed when total product is diminishing and returns are diminishing as firm is operating at the optimum level and cannot go above that, marginal product goes below zero and become negative that suggest negative returns to labor.