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CA Foundation · Business Economics · Theory of Production and Cost

When the marginal product of labour is positive but declining as more workers are employed with fixed capital, what happens to total product?

Total product keeps increasing but at a decreasing rate. A positive marginal product means each extra worker still adds output, so the total rises, while a declining marginal product means the additions get smaller. Total product falls only when marginal product becomes negative.

  1. ATotal product increases at a decreasing rateCorrect
  2. BTotal product increases at an increasing rate
  3. CTotal product falls
  4. DTotal product remains constant

Explanation

Marginal product is the addition to total product from one more worker. If MP is positive, TP rises. If MP is declining, each extra worker adds less than the previous one, so TP rises at a decreasing rate. TP would fall only if MP turned negative.

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