Question

If we had a situation of Diminishing Marginal Productivity, then this would be great news for the firm. Senior management loves this kind of cost reduction outcome.
True or False

Answer 1

Answer:

The correct answer is the second option: False.

Explanation:

To begin with, the well known term of "Diminishing Marginal Productivity" is understood to be an economic law whose main purpose is to explain that given a certain level of an input, the production of the company will start to go down eventually after adding more and more of that variable. Therefore that this theory states that when a company adds more of a factor of production, everything else constant, when it reaches a certain level that input will start to affect the output of the good and with it the profits of the business. That is why that if the company is in a situation of diminishing marginal productivity the senior management would not be pleased.