In general, as employment increases, the marginal return to labor increases and then decreases as employment continues to increase

In general, as employment increases, the marginal return to labor increases and then decreases as employment continues to increase. True False

The correct answer and explanation is:

The correct answer is: True

Explanation:

The statement describes a typical economic concept related to the marginal return (or marginal product) of labor. This concept is fundamental in production theory and helps explain how adding more workers affects the total output of a firm.

Marginal return to labor refers to the additional output produced by employing one more unit of labor, holding other inputs constant.

1. Initial Increase in Marginal Return:
   • When employment starts at a low level, adding more workers usually leads to a rising marginal return. This happens because workers can specialize, share tasks, and collaborate more efficiently.
   • For example, in a small factory, the first few workers might set up machinery, and additional workers can help speed up production significantly, increasing productivity per worker.
2. Diminishing Marginal Return:
   • After a certain point, the marginal return to labor begins to decrease as more workers are added. This is called the Law of Diminishing Marginal Returns.
   • Why? Because the fixed inputs (like machines, workspace, tools) become relatively scarce compared to the growing number of workers. So, each new worker contributes less additional output than the previous one.
   • Eventually, too many workers might crowd the workspace, leading to inefficiencies and a decrease in marginal return.
3. Possible Negative Marginal Return:
   • If employment continues to increase beyond the optimal point, marginal return can even become negative — meaning adding another worker actually reduces total output due to overcrowding or confusion.

Summary:

• At first, marginal return to labor rises due to better teamwork and specialization.
• After reaching an optimal employment level, marginal return declines because of fixed input limitations.
• This typical pattern is why the statement is True.

Understanding this concept helps firms decide the optimal number of workers to employ for maximum productivity and profit. It also forms the basis for wages, labor demand, and resource allocation in economics.