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Sagot :
Diminishing marginal returns to labor occur because the capital resources used by the firm are fixed in the short run.
Increasing input in the short term after an optimal capacity has been reached has the impact of decreasing marginal returns. At least one production factor, such as labor or capital, is maintained constant at the same time.
According to the law, this rise in input will lead to less significant increases in output. Returns to scale quantify the shift in productivity resulting from a long-term increase in all production inputs.
For instance, increasing the number of cooks in a restaurant while maintaining the same amount of kitchen space can boost output overall up to a point, but every new cook requires greater room, which eventually results in lesser increases in output as there are too many cooks in the kitchen.
If there are too many cooks, they may eventually stifle each other's efforts and produce less overall, resulting in negative returns.
To know more about diminishing marginal returns:
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