CA Foundation · Business Economics · Theory of Production and Cost
When total product reaches its maximum point in the short run, which of the following is true?
At the maximum of total product, marginal product is zero, because an extra unit of the variable factor adds nothing to output. After this point marginal product turns negative and total product starts to fall, which marks the start of Stage III.
- AMarginal product is zeroCorrect
- BAverage product is zero
- CMarginal product is at its maximum
- DMarginal product equals average product
Explanation
Total product is maximum when adding another unit of the variable factor adds nothing, so marginal product equals zero. Beyond this point, MP becomes negative and TP falls. MP equals AP at the maximum of AP, not of TP, and MP is at its maximum at the inflexion point of TP.
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