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Question
Macroeconomics
Posted 10 months ago
Which of the following is a way to avoid diminishing marginal returns to labor?
Choose 1 answer:
(A) Reduce the amount of natural resources available
(B) Increase the population
(C) Increase the amount of labor used
D Reduce the size of plant and equipment
(E) Increase the quantity of capital
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Answer from Sia
Posted 10 months ago
Solution
a
Understanding Diminishing Marginal Returns: Diminishing marginal returns occur when adding an additional factor of production results in a smaller increase in output
b
Analyzing the Options: To avoid diminishing marginal returns to labor, one must increase the efficiency of labor or complement labor with other factors of production
c
Correct Option: Increasing the quantity of capital (option E) can avoid diminishing marginal returns to labor because it allows labor to be more productive with better tools, machinery, or technology
Answer
(E) Increase the quantity of capital
Key Concept
Avoiding Diminishing Marginal Returns
Explanation
Increasing the quantity of capital can enhance labor productivity and prevent the onset of diminishing marginal returns to labor.
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