15. You run a firm and discover you have diminishing marginal product of labor. You should:
A. Add more capital
B. Hire more skilled workers
C. Pay the workers more so they work harder
D. Put a training program in place

Question

15. You run a firm and discover you have diminishing marginal product of labor. You should:
A.    Add more capital
B.    Hire more skilled workers
C.    Pay the workers more so they work harder
D.    Put a training program in place

BlackTom AI · Accepted Answer

When analyzing diminishing marginal product of labor, the core idea is that adding more labor eventually yields smaller increases in output unless other inputs or efficiency improvements are made.
Option A: Add more capital. While increasing capital can raise or complement output, simply adding capital doesn’t directly address the diminishing incremental output from each additional worker. It may help, but it’s not the most direct remedy to the stated phenomenon in the question.
Option B: Hire more skilled workers. Bringing in more skilled workers could potentially raise productivity, but it risks continuing the pattern of diminishing marginal returns unless the skill mix or technology changes. It also doesn’t specifically target the cause of diminished MPL as a policy move.
Option C: Pay the workers more so they work harder. Higher wages can influence effort, but pay adjustments don’t guarantee a sustained increase in productivity, especially if the bottleneck is technology, processes, or coordination. This choice presumes motivation alone will offset diminishing returns, which is not reliably effective.
Option D: Put a training program in place. Training can raise the effective productivity of current workers by improving skills, methods, and efficiency, which directly combats the symptoms of diminishing marginal returns from labor. It seeks to shift how worker effort translates into output and can help sustain higher marginal product.
In summary, while capital deepening or incentive changes can have effects, a training program directly targets worker effectiveness and is typically the most appropriate step when facing diminishing marginal product of labor, aligning with standard microeconomics reasoning about productivity improvements.

15. You run a firm and discover you have diminishing marginal product of labor. You should: A. Add more capital B. Hire more skilled workers C. Pay the workers more so they work harder D. Put a training program in place

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