The correct option is (c).
Explanation
Disguised unemployment is a phenomenon where more people are employed in an activity than are actually needed for its efficient execution. It is characterized by a situation where the marginal productivity of surplus labor is zero.Statement-wise Analysis:
- Statement 1 is Correct: Disguised unemployment implies that the number of people engaged in a job exceeds the number required to perform it. This is most commonly observed in the agricultural sector in developing economies, where entire families work on a single plot of land regardless of the actual labor requirement.
- Statement 2 is Incorrect: A defining feature of disguised unemployment is that the marginal productivity of the additional workers is zero. Consequently, if these surplus workers are withdrawn or removed from the activity, the total output or production remains unchanged, rather than falling.
- Statement 3 is Correct: It is considered a form of underemployment because the workers are not utilizing their full potential or skills. While they appear to be employed, their contribution to the total output is negligible, meaning they are effectively under-utilized.
Key Takeaway: In disguised unemployment, the marginal productivity of labor is zero; therefore, the removal of surplus labor does not affect the aggregate output.