If a Firm Is Experiencing Diminishing Marginal Returns to Labor

question 50

Multiple Choice

If a firm is experiencing diminishing marginal returns to labor, then which of the following statements is true?​

• A)The first workers the firm hired were better than the workers hired later on.
• B)The firm is experiencing decreasing returns to scale.
• C)The positive effect of specialization in production is being offset by the negative effect of crowding of inputs.
• D)Output is decreasing with increasing inputs.
• E)The firm should buy more non-labor inputs.

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Definitions:

Effective Annual Interest Rate

The interest rate on an investment or loan, which accounts for compounding over a given period.

Line of Credit

A flexible loan from a bank or financial institution that allows a borrower to draw down, repay, and redraw amounts up to a certain limit.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Cash Cycle

The period between the outlay of cash for the purchase of inventory and the collection of revenue from its sale.