In the short run, a firm's capital is fixed and more workers are employed. The law of diminishing marginal product means that:
Correct answer: B. Additional workers eventually add less output
- A. Total output immediately begins to fall
- B. Additional workers eventually add less output
- C. Average product remains constant at every level
- D. Fixed cost rises with every additional worker
Explanation
With capital fixed, successive workers eventually contribute smaller additions to total output. Total output may still rise, but it rises at a decreasing rate.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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