Homework Answers
Ans:
- Initial stage (I) consists of increasing returns, MP(derivative of TP) rises. Reason: Under-utilization of scale, learning by doing, division of labor.
- From stage II, diminishing returns come into existence where MP(derivative of TP) falls. Reason: Labor saturation, shortage in scale.
- Stage III shows negative returns where MP is negative. Reason: Over-utilization of scale, no place in scale to employ variable factor causes negative externalities.
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1.(10 points) Assuming that labor is the only variable input in the short run, draw (and...
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