CMA Foundation · Fundamentals of Business Economics and Management · Theory of Production
On a farm in Punjab, the total product of labour on a fixed plot is maximum at 6 workers. What is the marginal product of the 6th worker and the nature of the stage at this point?
When total product reaches its maximum, the marginal product is zero. This point marks the end of Stage II, the stage of diminishing returns. Adding more workers beyond it makes marginal product negative and total product falls.
- APositive and maximum; Stage I
- BZero; end of Stage IICorrect
- CNegative; Stage III
- DEqual to average product; start of Stage II
Explanation
Total product is at its maximum when marginal product is zero. Beyond this point MP turns negative and TP falls (Stage III). So the point of maximum TP marks the end of Stage II. Stage II begins where AP is maximum, not here.
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