Question

When firms add workers and find that the additional workers add less output than their predecessors did, they are experiencing A. The division of labor B. The law of large numbers C. Diminishing returns D. Diseconomies of scale

Answer 1

Answer:

The correct answer is letter "C": Diminishing returns.

Explanation:

The Law of Diminishing Marginal Returns states that as the number of new workers increases, an additional employee's marginal product at some stage would be less than the previous employee's marginal product. This is because at a certain point adding more employees implies not having enough space for the new hires to work which diminishes the marginal return of every new individual hired by the firm.