Question

Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returnsSelect one:a. set in when the fourth worker is hired.b. set in when the fifth worker is hired.c. set in when the sixth worker is hired.d. have not yet set in because output is still increasing.

Answer 1

Answer:

b. set in when the fifth worker is hired

After this point additional worker return will be lower.

Explanation:

Trhe diminishing return are the moment at which the marginal increase in production decrease.

In other words, adding a new resource provide less return than his predecessor.

Marginal

2 do 4 hours

3 do 6 houses (marginal 6 - 4 =    2)

4 do 9 houses (marginal 9 - 6 =    3)

5 do 13 houses (marginal 13 - 9 = 4)

6 do 15 houses (marginal 15 - 13 = 2)

the marginal output decrease from 4 to 2 the returns decreased.