Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be that

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Question restatement: Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be that

Options:
 a. the marginal product of labour is diminishing.
 b. the workers all perform the exact same set of tasks.
 c. there are gains from specialization.
 d. all workers are not paid the same wage.

Now let’s analyze each option to understand why it may or may not be true.

Option a: the marginal product of labour is diminishing.
- In many production settings, the marginal product tends to diminish as more units of a variable input are added, due to the law of diminishing marginal returns. If the marginal product of the new (additional) employee is greater than that of the previous one, this situation contradicts diminishing marginal product for that step. Therefore, this option does not explain why the new employee would have a higher marginal product than the previous one, and it would more likely describe a decreasing marginal product as more workers are added.

Option b: the workers all perform the exact same set of tasks.
- If all workers performed the exact same tasks with identical productivity, adding another worker would not necessarily raise the marginal product of the new hire above the previous one. In fact, homogeneity in tasks tends to produce similar marginal contributions, not a higher one for the next worker. This option fails to account for a higher marginal product for the latest hire and ignores potential specialization benefits that could raise output.

Option c: there are gains from specialization.
- When a firm increases its workforce and allows workers to specialize in narrower tasks, productivity per worker can rise due to increased efficiency, learning, and division of labor. The marginal product of the new employee being higher than the previous one is consistent with the idea that the latter workers had not yet specialized as much, while the new hire benefits from the gains of specialization realized in the production process. This option provides a coherent mechanism: specialization improves marginal product for subsequent hires, making this option plausible and consistent with standard microeconomic theory.

Option d: all workers are not paid the same wage.
- Wage dispersion across workers relates to compensation, not directly to the marginal productivity of a specific hire. While wage differences can reflect productivity or bargaining, the statement about higher marginal product for the new hire is a statement about output, not pay. This option misattributes the cause and does not logically explain why the marginal product would be higher for the newly hired worker.

Summary interpretation: Among the given statements, only the idea of gains from specialization offers a direct mechanism by which the marginal product of the new employee could exceed that of the previous employee, through improved task division and efficiency gains. The other options either contradict the typical behavior of marginal product or misattribute the cause to wages or task sameness rather than efficiency gains from specialization.

THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be that

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THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be that

View Explanation

Log in for full answers

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