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Difficulty: MediumShort-Run Production and Law of Diminishing Returns

In the short-run theory of production, at which point does Stage II (the rational zone of production) end?

  1. When marginal product becomes zero and total product reaches its maximum pointAnswer
  2. B
    When marginal product reaches its maximum value and exceeds average product
  3. C
    When average product intersects marginal product at the peak of marginal product
  4. D
    When total product becomes negative while average product is at its maximum

Answer

Stage II of short-run production ends when marginal product falls to zero and total product reaches its maximum point.
Stage II (the economic or rational region of production) begins where average product is at its maximum (MP=APMP = AP) and ends where marginal product equals zero (MP=0MP = 0), which coincides with the maximum total product (TPTP). Beyond this point, Stage III begins, characterized by negative marginal product.

Step-by-Step Solution

1
Identify the boundaries of short-run production stages
Stage I ends where average product (APAP) reaches its maximum (MP=APMP = AP). Stage II ends where marginal product (MPMP) drops to zero (MP=0MP = 0) and total product (TPTP) is maximized.
Stage II represents the rational zone of production where diminishing returns occur, continuing until additional variable input yields zero additional output.
2
Determine the condition for the conclusion of Stage II
At the end of Stage II, MP=0MP = 0 and TPTP is at its maximum.
If more variable input is added past this point, MPMP becomes negative (Stage III), causing total product to fall.

Key Concept

Stages of Short-Run Production and the Law of Diminishing Returns
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Topics

Short-Run Production and Law of Diminishing Returns

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