Question

Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be that Select one: a. there are gains from specialization. b. all workers are not paid the same wage. c. the workers all perform the exact same set of tasks. d. the marginal product of labour is diminishing.

Answer 1

If the marginal product for that employee is greater than for the previous employee hired, it must be that there are gains from specialization

What is marginal product ?

• The marginal product or marginal physical productivity of an input (factor of production) in economics, and particularly neoclassical economics, is the change in output that results from using one more unit of a specific input (for example, the change in output when a firm's labor is increased from five to six units), assuming that the quantities of other inputs are kept constant.
• The marginal product is the mathematical derivative of the production function with respect to that input if the output and the input are infinitely divisible, in which case the marginal "units" are infinitesimal.
• When more of one input, such as labor, is used while maintaining a constant level of the other input, such as capital, the marginal product initially rises according to the "rule" of declining marginal returns.

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