PRC-3 · Chapter 12 · Question 3 of 69
A bakery owner with one oven keeps hiring more bakers. The first few bakers increase the total output rapidly, but eventually, adding a 5th baker adds less to the total output than the 4th baker did, because they are crowding around the single oven. What law does this illustrate?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Law of variable proportions (diminishing returns)
Explanation
The law of variable proportions states that adding more variable inputs (labor) to a fixed input (oven) will eventually yield progressively smaller increases in output (diminishing marginal product).
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