The tendency where marginal productivity first increases then starts falling is known as ______
The tendency where marginal productivity first increases then starts falling is known as ______
Solution
Option 1 -> Describes the phenomenon where marginal productivity increases initially and then declines.
Option 2 -> Relates to consumer theory about substituting goods, not production.
Option 3 -> Refers to rising costs with production, not marginal productivity patterns.
Option 4 -> Simply defines marginal productivity itself, not the law describing its behavior.
Hence, Law of variable proportions -> This law, also known as the Law of Diminishing Returns, explains production behavior when one input is varied while others remain fixed. It has three stages: (1) Increasing Returns - where marginal productivity rises due to better utilization of fixed factors, (2) Diminishing Returns - where marginal productivity falls but remains positive, and (3) Negative Returns - where marginal productivity becomes negative. This perfectly describes the tendency mentioned in the question where marginal productivity first increases then starts falling -> correct
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