B the marginal cost of that output is rising due to...

B. the marginal cost of that output is rising due to diseconomies of scale. C. the marginal cost of that output is rising because the only additional cost to producing more output is the additional wages paid to hire more workers. D. the marginal cost of that output is rising because the total cost of labor is increasing with each additional worker. E. the marginal cost of that output is falling because the only additional cost to producing more output is the additional wages paid to hire more workers.

Transcript

00:01 So here we're talking about diminishing marginal return.

00:04 So the first thing we should be able to do is simply define what the heck that is, right? and that's talking about the change in output or over the change in input, right? when we talk about returns, we're talking about how much we're getting.

00:22 So how much are you getting out as you put more in? and diminishing marginal returns says that this is going towards zero.

00:32 As input grows, right? so as you put more and more and more of the input into the process, you get less and less and less output eventually going towards zero, right? so the classic example here is with, say, workers or machines, you put more or more or more workers or machines into your firm, and you get less and less and less extra output, right? so a diminishing marginal returns production function, right? if you said l, right, and we usually think of l as the number of workers, and we think of output, a diminishing returns production function usually looks like this, right? this would be a function of the number of workers, and it's getting flatter because the slope is going towards zero, right? the change in workers relative to the change in output is getting smaller and smaller and smaller, right? that ratio is getting closer and closer and closer towards zero.

01:36 So this rules out a, right? because we want flatter, not steeper.

01:41 A suggests the exact opposite.

01:45 So what about b? the production function and total cost curve still get, it also rules out c because we also want for the same reasons, we want the production function to be getting flatter.

01:57 So we're now down to a and b...

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