Firm X increases its labor input while its capital input remains fixed. The total output curve of the firm is?

Question

Firm X increases its labor input while its capital input remains fixed. The total output curve of the firm is upward rising but with a decreasing slope. What is the reason for this?


The total output decreases with an increase in labor.

The total output decreases with constant capital.

The marginal product of labor decreases with an increase in labor.

The marginal product of capital increases with an increase in labor.

The marginal product of labor increases with constant capital.

Answer 1

The marginal product of labor decreases with an increase in labor. This is the idea of decreasing marginal returns. As you add more and more of something, each additional unit will increase output by a smaller amount. Lets say you have 2 machines and no employees. Since you have to run both the machines at once by yourself, this could be a bit hard. Say you hire an employee to help you. This addition would help you a great deal. Now lets say you add 10 employees. With five employees on each machine, your output would increase some, since the machine could probably be run longer hours and a bit more efficiently, but it is not going to increase by as much as it was by the addition of the first employee. If you add 100 employees, your output may actually fall, since it may have reached the point of negative returns as the employees begin to get in the way of each other and thus decrease efficiency and productivity. But the gist is that an additional unit will increase the output by a smaller amount with each unit that is added.

Answer 2

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