Answer to Question #249999 in Microeconomics for Thom

Question

As quantity of a variable input increases, explain why the point where marginal product begins to decline is reached before the point where average product begins to decline. Also explain why the point where Average product begins to decline is reached before the point where total product begins to decline.

Answer 1

(a)

Point of decline of marginal product is reached before that of average product because, at the point where marginal product begins to fall, the total product continues to grow but at a diminishing rate from this point. At this point, the return yield per unit from the production inputs begin to fall.

(b)

The point where average product begins to decline is reached prior to the decline of total product because , average product starts decreasing immediately when the marginal lies below it. At this point profit yield per unit begins to fall.On the other hand, total product begins to decline at the point where marginal product becomes zero. At this point completely no profit is yield from the additional inputs in the process of production. This is later on after decline of average product already started.