When the output added by each additional worker is proportionally less, what it shows?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Marginal product falls.
When the output added by each additional worker is proportionally less than the previous one, it indicates that the marginal product (MP) of labor is falling. This situation occurs after a certain point in production due to the Law of Variable Proportions, which states that adding more units of a variable input (like labor) to a fixed input (like land or machinery) will eventually lead to a decline in the marginal product of the variable input.