Question

28) The law of diminishing returns, as it applies to labor, means that A) the marginal product of labor will eventually be a horizontal line at zero. B) the average product of labor starts to decline before the marginal product of labor. C) total output eventually decreases. D) the average product of labor increases at a decreasing rate. E) the marginal product of labor eventually decreases as more labor is added with capital held fixed. 29) A firm's short-run labor demand curve is downward sloping A) because labor is subject to diminishing marginal productivity. B) only when there are increasing returns to scale in the production process. C) because product price must decrease when the firm employs more workers. D) because labor productivity and product price are directly related. E) because the firm will use more capital when it employs fewer workers. 30) All of the following firms are producing on the same output isoquant. Which firm will use the most labor? A) Wage $60: Hourly Price of Capital $40 B) Wage $6; Hourly Price of Capital $2 C) Wage $30: Hourly Price of Capital $40 D) Wage $120: Hourly Price of Capital $240 E) Wage $15: Hourly Price of Capital S15

Answer 1

28) The answer E -) The marginal prodcut of labor eventually decreases as more labor is added with capital held fixed.

29) The answer is A -) because labor is subject to diminshing marginal productiivity .

because A firm's short run labor demand curve is downward sloping because of the law of diminishing returns , which states that as more workers are hired, the marginal product of labor is declining which cause the marginal revenue product of labor to fall as well.

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