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Microeconomics

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Law of Diminishing Marginal Returns: What's the Scenario?

MICRO-WVYCHK

Which of the following scenarios is an example of the neoclassical law of diminishing marginal returns? Select ALL that apply.

A

The law office of Simonster and Garfunky has 5 typewriters and just hired a sixth secretary (assume secretaries are only productive when they’re working on typewriters).

B

The law office of Cosby, Stillwater, and Nashville hired the most qualified lawyers from the top law schools first, and now must hire less qualified lawyers from lower ranked law schools, so each new hire is decreasing average productivity.

C

Youngster wants to work for Cosby, Stillwater, and Nashville after they fire all their less qualified lawyers (so all the lawyers are of the same high quality), but in his zeal to impress, he destroys the copy machine, and all the lawyers are suddenly very unproductive.

D

The law office of Mummies and Poppies is a growing firm, hiring a lot of young lawyers, but even though each new hire is as competent as the one before, productivity is decreasing because they are regularly bumping into each other to access the client list.