The law of diminishing marginal product of labor is demonstrated by which of the following?

• A. Increasing the number of workers always results in proportional increases in output.
• B. Reducing the number of workers leads to higher total output.
• C. Adding more workers to a fixed amount of capital eventually leads to smaller increases in output.
• D. Hiring additional workers causes the marginal product of labor to increase indefinitely.

Answer: (C)

Verified step by step guidance

1. Understand the concept of the law of diminishing marginal product of labor: it states that as more units of labor are added to a fixed amount of capital, the additional output (marginal product) produced by each new worker eventually decreases.
2. Analyze each option by comparing it to the definition: the first option suggests proportional increases in output with more workers, which contradicts diminishing returns.
3. The second option claims reducing workers increases total output, which is generally not true and unrelated to diminishing marginal product.
4. The third option states that adding more workers to fixed capital eventually leads to smaller increases in output, which aligns perfectly with the law of diminishing marginal product.
5. The fourth option says marginal product increases indefinitely with more workers, which contradicts the law since marginal product eventually decreases.