Practice question · Multiple choice
Diminishing marginal product of labour is often attributed to workers becoming tired. What is the actual reason in the model?
Hints
- The model assumes every worker is identical. Ask what else is being held fixed.
- One kitchen, twenty cooks. What is scarce?
Show the answer
B. Capital is fixed, so each worker has less to work with
Why
Workers are identical by assumption, so the falling product must come from the fixed capital being shared ever more thinly, twenty cooks in one kitchen. Skill and fatigue are real effects and are not what the curve is drawing, which is why the phenomenon disappears in the long run when capital can expand too.
Practise Production and Costs
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