Which statement is TRUE? Diminishing returns is said to occur as the marginal pr
ID: 1165826 • Letter: W
Question
Which statement is TRUE?
Diminishing returns is said to occur as the marginal productivity of labor falls when a firm adds additional workers to a fixed amount of capital.
Constant returns to scale is said to occur when a firm doubles the amount of labor it uses and output doubles.
The average productivity of labor falls because the more labor a firm hires the more difficult it becomes for the firm's managers to coordinate the activity of their workers.
If the technology that a firm uses is characterized by increasing returns to scale, then they can reduce their cost of production by increasing the amount of labor they hire.
Negative returns occurs as a firm doubles all its inputs and its output decreases.
Diminishing returns is said to occur as the marginal productivity of labor falls when a firm adds additional workers to a fixed amount of capital.
Constant returns to scale is said to occur when a firm doubles the amount of labor it uses and output doubles.
The average productivity of labor falls because the more labor a firm hires the more difficult it becomes for the firm's managers to coordinate the activity of their workers.
If the technology that a firm uses is characterized by increasing returns to scale, then they can reduce their cost of production by increasing the amount of labor they hire.
Negative returns occurs as a firm doubles all its inputs and its output decreases.
Explanation / Answer
Constant return to scale is said to occur when the output is increased by the same amount as the input. if only labor is doubled the diminishing return will come in and the output will not increase. average productivity declined because of a decrease in the marginal productivity of labor.
In increasing return to scale the cost decrease as the firm increase the output not by hiring more labor but by achieving economies of sale. there is no negative return but decreasing return to scale. The answer is "A".
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