Question

What can you conclude about a firm in the short run from its marginal product numbers as its output approaches capacity production

Answer 1

Answer: Law of Diminishing returns would apply

Step-by-step explanation:

The Law of Diminishing returns is used to describe the phenomenon where after a certain level of input, the output produced no longer increases at an increasing rate but instead starts increasing at a decreasing rate.

For instance;

Labor Output

2 4

4 8

6 16

8 20

10 22

Notice how at first the output increased by 4 then by 8 but then started increasing by 4 and then by 2. This is the Law of Diminishing Marginal returns and a reality that normally faces a firm in the short run as its output approaches capacity production.