Read the following statements - Assertion (A) and Reasoning (R):
Assertion: With the factor price given, initially the SMC falls, and then after a certain point, it rises.
Reasoning: According to the law of variable proportions, initially, the marginal product of a factor increases and after a certain point, it decreases. This means, initially, to produce every extra unit of output, the requirement of the factor becomes less and less, and then after a certain point, it becomes greater and greater.
From the given alternatives choose the correct one:
Assertion: With the factor price given, initially the SMC falls, and then after a certain point, it rises.
Reasoning: According to the law of variable proportions, initially, the marginal product of a factor increases and after a certain point, it decreases. This means, initially, to produce every extra unit of output, the requirement of the factor becomes less and less, and then after a certain point, it becomes greater and greater.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 1
As the law of variable proportions states: initially, the marginal product of a factor increases and after a certain point, it decreases. This means, initially, to produce every extra unit of output, the requirement of the factor becomes less and less, and then after a certain point, it becomes greater and greater. With the factor price given, initially the SMC falls, and then after a certain
point, it rises.