Which of the following is true about the marginal productivity of any resource?

• A. It is the total output produced by all units of the resource combined.
• B. It is the additional output produced by employing one more unit of the resource, holding all other inputs constant.
• C. It is unrelated to the law of diminishing returns.
• D. It always increases as more units of the resource are employed.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definition of marginal productivity. Marginal productivity of a resource refers to the additional output generated by employing one more unit of that resource, while keeping all other inputs constant.
2. Step 2: Differentiate marginal productivity from total output. Total output is the combined production from all units of the resource, whereas marginal productivity focuses on the incremental change from adding one more unit.
3. Step 3: Recognize the relationship between marginal productivity and the law of diminishing returns. The law of diminishing returns states that as more units of a resource are added, holding other inputs fixed, the marginal productivity eventually decreases.
4. Step 4: Analyze the behavior of marginal productivity as more units are employed. It does not always increase; instead, it typically rises initially but then declines due to diminishing returns.
5. Step 5: Conclude that the correct statement about marginal productivity is that it measures the additional output from one more unit of the resource, with other inputs held constant, and is related to the law of diminishing returns.