The Principle of Diminishing Returns Does Not Apply to Labor

question 142

Multiple Choice

The principle of diminishing returns does not apply to labor when all inputs are allowed to vary because:

• A) a firm can fire inefficient workers.
• B) eventually the marginal product of labor will begin to increase again.
• C) a firm can build an additional production facility so each worker's share of the facility doesn't necessarily decrease.
• D) None of the above, diminishing returns always apply.

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Definitions:

Training Budget

The allocation of financial resources dedicated to training and development activities within an organization.

Profit-Sharing

A compensation strategy where employees receive a portion of the company's profits in addition to their regular salary, linking their earnings to the company’s performance.

Flexible Benefit Plans

Employee benefit programs that allow workers to choose from a variety of pre-tax benefits, customized to their personal needs.

Skill-Based Pay

A compensation system where employees are paid based on the skills and qualifications they bring to their job, rather than just their job title or position.