In the Short Run, Marginal Product of Labour Increases at First

question 139

Multiple Choice

In the short run, marginal product of labour increases at first and then falls because

• A)as more labour is hired, they are not as skilled as the first ones hired.
• B)there are fewer opportunities for division of labour and specialisation when fewer workers are hired.
• C)managerial inefficiency sets in when a firm gets too large.
• D)the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive.

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Definitions:

Annual Overhead

The total expenses incurred by a business to operate over the course of a year, excluding direct labor and materials costs.

Direct Labor Hours

Direct labor hours are the total hours worked by employees directly involved in the production of goods or services.

Overhead Rate

The rate at which indirect costs are allocated to produced goods or services.

Direct Labor Dollar

The total cost of wages paid to workers who are directly involved in the production of goods or delivery of services.