Question

When total product increases at an increasing rate, it is known as ________.

• A. stage of negative returns
• B. stage of diminishing returns
• C. stage of increasing returns
• D. stage of constant returns

Answer 1

Answer: (C)

stage of increasing returns

Marginal Product is the defined as the change in total product resulting from one additional unit of a variable factor. For output to be maximized the marginal product should be 0. As if marginal product ≥ 0 it is profitable to increase production. If marginal product ≤ 0 it is profitable to decrease production. Due to the fixed resources initially being underutilized, the total product increases as a result of adding more workers, this is when the marginal product is rising.