Answer to Question #218642 in Economics for Meher

Question

In your "toast" production function, you used your labor and a toaster as capital. Keeping capital constant, i.e., with only one toaster if you keep adding the labor, i.e., bring your friends to help you with making toasts, which of the following might happen?

Group of answer choices

Marginal returns to labor will be a constant.

Marginal returns to labor will keep decreasing and, after a point, it will become negative.

Marginal returns to labor will keep increasing.

Marginal returns to labor will keep increasing and then be a constant.

Answer 1

Keeping capital constant, i.e., with only one toaster if you keep adding the labor, i.e., bring your friends to help you with making toasts, marginal returns to labor will keep decreasing and, after a point, it will become negative, because more friends with one toaster will be less productive.

So, the correct answer is 2.