The short run production function is concave because
A) hiring more employees is always more efficient for the firm.
B) the best employees are hired first,so the quality of employees decreases as more workers are added.
C) it is harder for a firm to manage a higher level of capital.
D) the level of capital can be adjusted.
E) hiring more workers,holding capital fixed,leads to overcrowding.

Question

Quizplus · Accepted Answer

The short run production function is concave because hiring more workers, while holding capital fixed, leads to overcrowding. This means that each additional worker hired will have less and less output as the factory becomes more crowded and there are fewer resources available for each worker to use. As a result, the marginal product of labor decreases as more workers are added, leading to a concave production function.

The Short Run Production Function Is Concave Because