Multiple Choice
Which of the following would be a likely mathematical expression for total variable cost in terms of output (Q)?
10. The Costs of Production
The Production Function and Diminishing Returns
Multiple Choice
Why does marginal product initially rise and eventually fall as more workers are hired?
A
Because changes in market demand first boost output per worker and later reduce it, causing an initial rise and subsequent fall in marginal product.
B
Because adding workers increases total output but reduces the average quality of output, so marginal product falls due to lower-quality production.
C
Because firms always experience learning-by-doing so marginal product keeps rising indefinitely as more workers are hired.
D
Because early hires permit greater specialization and division of labor which raises marginal product, but as more workers share fixed capital and space, congestion and diminishing marginal returns cause marginal product to fall.
Verified step by step guidance1
Understand the concept of marginal product (MP), which is the additional output produced by hiring one more worker, holding other inputs constant.
Recognize that when a firm hires the first few workers, they can specialize and divide tasks efficiently, which increases productivity and causes the marginal product to rise.
Note that specialization allows workers to focus on specific tasks, improving efficiency and output per worker during the initial phase of hiring.
As more workers are added, fixed resources like capital and workspace become limited, leading to congestion and less efficient use of these resources.
This congestion causes diminishing marginal returns, meaning each additional worker contributes less to total output than the previous one, so the marginal product eventually falls.
Related Videos
Related Practice
