If the marginal product curve is increasing from workers 1-89 and then decreases
ID: 1192672 • Letter: I
Question
If the marginal product curve is increasing from workers 1-89 and then decreases steadily, crossing the horizontal axis at 190 workers, we know that
A) the total output curve increases from workers 1-89, decreases from workers 90-189, and becomes 0 at the 190th worker.
B) the total output curve is increasing at an increasing rate from workers 1-89, then increases at a decreasing rate until the 190th worker, after which it decreases.
C) the total output curve is increasing throughout, although at an increasing rate for the first 190 workers and at a decreasing rate after the 190th worker.
D) diminishing marginal product sets in with the 190th worker.
Explanation / Answer
Law of variable proportion states that as more and more units of variable factor is combined with fixed factor, a stage must ultimately come where marginal product of variable factor starts declining.
When MP is increasing, TP is increasing at increasing rate.
when MP is falling, TP increases at decreasing rate, and
When MP becomes zero, TP is at its highest and lastly when MP is negative, then TP starts falling.
So, the answer to this question is option (B)