When marginal product reaches its maximum, what can be said of total product?
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1 total product must be at its maximum
2 total product starts to decline even if marginal product is positive
3 total product is increasing if marginal product is still positive
4 total product levels off
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3) Total Product is increasing if marginal product is still positive.
When marginal product reaches its maximum, Total Product increases at increasing rate.
3 Stages Of Production Function
• Stage 1 :
When TP increases at increasing rate, then MP and AP also increases. This stage ends when AP is in maximum. It represents Increasing Returns to a factor.
• Stage 2 :
TP increases at a decreasing rate. Then, MP falls and become zero and AP declines. This stage represents Diminishing Returns to a Factor.
• Stage 3 :
TP starts to decline, MP becomes negative. AP also declines, but never become 0. It represents Negative Returns to a Factor.
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