Question

Q 13

13. Giving reason, state whether the following statement are true or false.

a. When there are diminishing returns to a factor total product always decreases.
b. When there are diminishing returns to a factor marginal and total product both always fall.
c. Increase in total product always indicates that there are increasing returns to factor.

Answer 1

Dear student,
1. False, In case of diminishing returns to factor the total product increases at a decreasing rate.
2. False, In case of diminishing returns to a factor the Marginal Product falls while the Total Product increases at a decreasing rate.
3. Increase in total product does not always indicate increasing returns to factor. This is because in case of decreasing return to factor the total product increases but at a decreasing rate.