A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively. Diminishing returns to labor set in with the worker.

Diminishing returns to labor set in with the 2nd worker.

Diminishing returns to labour is a theory that states that says as more units of labor is added to land , output might increase initially but after a point total output would increase at a decreasing rate and marginal product would begin to decrease.

Number of worker    Marginal product

1                                     -

2                                     5 (9 - 4)

3                                     3 (12 - 9)

4                                     2 (14 - 12)

Marginal product begins to decline from the 2nd worker.

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Third

Explanation:

Diminishing returns to labor refers to the phenomenon where every additional worker leads to an increase in production at a decreasing rate.

Using the scenario described, when there was only one employee the company could mow 4 lawns a day. They added a 2nd worker and that figure went to 9 lawns a day which is an increase of FIVE.

When they added a 3rd worker, the figure again went up but only to 12 which is an increase of THREE only as opposed to the last increase of FIVE.

After the third worker therefore, there was an increase but at a smaller rate.

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