Question

All else held constant, if a firm hires more workers, __________.

the average product will always be increasing

it will tend to have higher levels of output

labor costs will decrease

the average product will always be decreasing

Answer 1

If a firm hires more workers, **it will tend to have higher levels of output**.

While hiring more workers generally leads to increased production, it's important to note that the average product (output per worker) may not necessarily increase due to the law of diminishing returns, which states that adding more of one factor of production (like labor) while keeping other factors constant (like capital) will eventually yield lower per-unit returns. However, in terms of total output, hiring more workers usually leads to an increase.