Question

Why does it not make any Economic sense to produce in stage one and stage three of short run production

Answer 1

It is clear why stage III is irrational: the firm would be using more of its variable input to produce less output. However, it may not be as apparent why stage I is also considered irrational. 10. The reason is that if a firm were operating in stage I, it would be grossly underusing its fixed capacity

Answer 2

Explanation:

It is clear why stage III is irrational: the firm would be using more of its variable input to produce less output. However, it may not be as apparent why stage I is also considered irrational. 10. The reason is that if a firm were operating in stage I, it would be grossly underusing its fixed capacity.