Which of the following short run production functions have diminishing marginal returns?

Question

BlackTom AI · Accepted Answer

To determine which short-run production function exhibits diminishing marginal returns, we need to examine how output changes as labor input increases.
Option analysis begins with Figure 1: The graph shows a straight-line relationship between labor (L) and output (F(L)), meaning output increases at a constant rate as labor rises. In this case, the marginal product of labor (the slope) is constant, not diminishing. Therefore, Figure 1 does not display diminishing marginal returns.
Next, Figure 2: This graph is curved and concave, with output rising as labor increases but at a decreasing rate. The slope of the curve declines as L grows, which implies that the marginal product of labor decreases with more labor input. This is the textbook sign of diminishing marginal returns.
Now consider the option that both figures exhibit diminishing marginal returns. Given the analysis above, Figure 1 does not show a decreasing marginal product, so the statement that both have diminishing returns is incorrect.
Finally, the option Neither would be claiming that neither figure shows diminishing returns. Since Figure 2 clearly demonstrates a decreasing marginal product, this option is also incorrect.
In summary, the key distinction is whether marginal product declines with additional units of labor. Figure 2 shows this decline, while Figure 1 does not, making Figure 2 the sole example of diminishing marginal returns among the provided figures.

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Which of the following short run production functions have diminishing marginal returns?

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