Question

Theory of production deals with producer’s behaviour, and according to this theory output produced by a firm passes through three stages in the short run.

1. Which are the three stages of production? 

2. Analyse and bring out the salient features of each stage. 

3. Which stage of production is very important as far as a firm is concerned? Why?

4. Give suitable diagram by drawing the Total Product, Average Product & Marginal Product curves.

Answer 1

1. Increasing, diminishing and negative 

2. First output increases at increasing rate, then at diminishing rate & finally starts falling. 

3. Second stage, profit maximisation occurs in this Stage.