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Question
State whether the following statements are true or false. Give reasons for your answer:
Total product always increases whether there is increasing returns or diminishing returns to a factor.
Solution
True, Total Product (TP) always increases during the phase of increasing returns or diminishing returns to a factor. However, the difference lies in the rate at which TP rises during the two stages. TP increases at an increasing rate during the stage of increasing returns to factor, whereas, during the stage of decreasing returns, TP increases at a diminishing rate.
RELATED QUESTIONS
Define marginal product.
State the behaviour of marginal product when only one input is increased and other inputs are hold constant.
Give the meaning of producer’s equilibrium. A producer that quantity of his product at which marginal cost and marginal revenue are equal. Is he earning maximum profits? Give reason for your answer.
State whether the following statements are true or false. Give reasons for your answer:
(i) When marginal revenue is constant and not equal to zero, then total revenue will also be constant.
State whether the following statements are true or false. Give reasons for your answer:
As soon as marginal cost starts rising, average variable cost also starts rising.
What is the marginal product of an input?
Explain the relationship between the marginal products and the total product of an input.
The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
|
L |
TPL |
|
0 |
0 |
|
1 |
15 |
|
2 |
35 |
|
3 |
50 |
|
4 |
40 |
|
5 |
48 |
The following table gives the average product schedule of labour. Find the total product and marginal product schedules. It is given that the total product is zero at zero level of labour employment.
|
L |
APL |
|
1 |
2 |
|
2 |
3 |
|
3 |
4 |
|
4 |
4.25 |
|
5 |
4 |
|
6 |
3.5 |
