Answer to Question #228130 in Microeconomics for Emy

Question

What is the law of diminishing marginal product?(3 marks)

a. In which stages of production it manifest.

b. What is the logical justification for the law of diminishing marginal

Answer 1

According to the rule of decreasing marginal returns, any manufacturing process will reach a point when adding one more production unit while holding the rest constant would result in a loss in overall output. It's also known as "the rule of growing costs," since increasing the number of production units reduces marginal returns, causing the average cost of production to rise.

b)According to the law of diminishing returns, manufacturing efficiency goes through three stages:

Stage 1: Increasing the rate of return

Adding to one production variable is likely to enhance output at first since constant inputs are plentiful compared to variable inputs. As a result, increasing the number of units of the variable component will improve the efficiency of the fixed factors and boost output.

Stage 2: Returns are diminishing

The overall production will continue to rise as more units of the variable component are introduced. During this stage, however, the overall product grows at a steadily declining pace. The product reaches its maximum value at the end of this phase, and the marginal product becomes zero. This stage is where optimal production is set. After this point, adding more units of the variable factor will cause the overall output to decrease.

Stage 3: Negative returns

Excessively increasing the variable input after the point of optimum output will result in a reduction in efficiency and, in certain cases, a negative return on investment. The excess in the variable factor is now affecting the entire manufacturing process.

When an advantage is obtained in a factor of production, the productivity gained from each successive unit produced will only grow slightly from one unit to the next, according to the law of diminishing marginal productivity. In second stage it manifest, which is logical true. 

b)

The law of diminishing marginal returns is an economics theory that states that once a certain level of capacity has been reached, adding another factor of production will result in smaller increases in output. For example, a worker might work for 40 hours and produce 100 units per hour. The laborer's output may decline to 90 units for every hour in the 41st hour. Because the output has begun to decrease or diminish, this is known as Diminishing Returns.