Answer to Question #33513 in Microeconomics for maha

Question

the firm likely to stop hiring if the marginal product of the last worker hired is grater than the marginal product of the worker before the last worker hired? Explain. i

Answer 1

There is a factory which produces toys. When there are no workers in the factory, no toys are produced. When there is one worker
in the factory, six toys are produced per hour. When there are two workers in
the factory, eleven toys are produced per hour. There is a marginal product of
labor of 5 when there are two workers in the factory compared to one. When the
marginal product of labor is positive, this is called increasing marginal
returns. However, as the number of workers increases, the marginal product of
labor may not increase indefinitely. When not scaled properly, the marginal
product of labor may go down when the number of employees goes up, creating a
situation known as diminishing marginal returns. When the marginal product of
labor becomes negative, it is known as negative marginal returns.