What Is the Effect of Diminishing Returns to Labor on the Slope

question 34

Multiple Choice

What is the effect of diminishing returns to labor on the slope of the aggregate production function (where output is measured on the vertical axis and employment is measured on the horizontal axis) ?

• A) It implies that the slope of the curve increases as the number of workers employed increases.
• B) It implies that the slope of the curve becomes negative as the number of workers employed increases.
• C) It implies that the slope of the curve decreases (or becomes flatter)as the number of workers employed increases.
• D) It keeps the slope the same throughout.
• E) It has nothing to do with the slope of the aggregate production function.

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Definitions:

Price Floor

A government or regulatory-imposed minimum price that can be charged for a good or service, below which it cannot legally be sold.

Milk

A nutrient-rich liquid food produced by the mammary glands of mammals, commonly consumed by humans.

Market Equilibrium

A condition or state in which the supply of a product matches its demand, leading to a stable price.

Surplus

An excess amount of a product or resource compared to the demand for it.