Microeconomics: Production and Costs · Class 11 · CBSE · Commerce Economics
Why does the marginal product of a variable factor generally first increase and then decrease when more units of that factor are combined with a fixe…
Practice question from Microeconomics: Production and Costs (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · Subjective · Q-512A7C
Why does the marginal product of a variable factor generally first increase and then decrease when more units of that factor are combined with a fixed factor in the short run?
Solution
Initially, specialisation and fuller utilisation of the fixed factor can raise marginal product. Eventually, the fixed factor becomes insufficient for the increasing variable factor, so the law of diminishing marginal returns causes marginal product to decline.
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