Decreasing marginal returns occur in the short run as more labour is hired to work in a fixed sized plant because
A) the plant becomes less specialised.
B) adding more workers exhausts the possible gains from specialisation.
C) the entrepreneur does not know how to manage more workers.
D) less efficient and less productive workers are hired.
E) each worker will produce more than the worker previously hired.

Question

Quizplus · Accepted Answer

Adding more workers to a fixed sized plant exhausts the possible gains from specialization, thereby causing decreasing marginal returns in the short run. This is because the fixed amount of capital and other inputs cannot accommodate an infinite number of workers, and at some point, the additional workers will start getting in each other's way and reduce the overall productivity of the plant.

Decreasing Marginal Returns Occur in the Short Run as More