Question

give a example of the situation when marginal product of the variable factor can rise?

Answer 1

Dear Student,

Suppose firm A has employed 50 units of capital and 0 units of labour. Now, when it starts employing labour, the marginal product of first few units of labour would be increasing or rising, after that for a few units, it will be diminishing but positive, and if we keep increasing units of labour, then after a certain point, it will become negative. Therefore, we can say that, marginal product of the variable factor rises in the first stage of production, that is, stage of increasing returns as per the law of variable proportions.

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