Answer to Question #195208 in Macroeconomics for GEELBOY MDLULI

Question

Draw and explain three stages of neoclassical production function

Answer 1

In neoclassical production function there are two factors of production capital and labor.

Y=F(K,L)

In the 1st stage of production TP is rising at an increasing level and marginal product is way greater than average product which means that AP is rising.

In the second stage of production, TP increases at constant level and MP=AP it means that AP is at its constant level.

In the 3rd stage, TP is falling and MP<AP and AP is falling and become negative.