Which of the following states that "The marginal product of a factor input initially rises with its employment level, but after reaching a certain level of employment, it starts falling"?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Law of Variable Proportions.
The marginal product is the extra output from one more unit of a factor. Its tendency to first rise and then fall is the law of variable proportions.
One factor is held fixed while another is increased, so the ratio between them changes. At first this ratio becomes more suitable for production, and marginal product rises. Later production becomes too crowded with the variable input, and marginal product falls.
Option (1) Diminishing Returns to Scale. — Incorrect. This is the same as decreasing returns to scale. Returns to scale belong to the long run, when all inputs are raised in the same proportion. Here output rises by a smaller proportion than the inputs.
Option (2) Law of Variable Proportions. — Correct. It deals with one input changing while another stays fixed. It gives the marginal product curve its inverse ‘U’ shape.
Option (3) Law of Diminishing Marginal Rate of Substitution. — Incorrect. This belongs to consumer behaviour. As a consumer has more of one good, she gives up less of the other for each extra unit.
Option (4) Increasing Returns to Scale. — Incorrect. Here all inputs are raised in the same proportion and output rises by a larger proportion.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 13-05 S2* 06-06 S1* | 13-05 S2* 27-05 S2* 28-05 S2 | – | – | – |
* A similar question.
NCERT (2026-27): “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions …This tendency of the MP to first increase and then fall is called the law of variable proportions or the law of diminishing marginal product. Law of variable proportions say that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling.… …As we hold one factor fixed and keep increasing the other, the factor proportions change. Initially, as we increase the amount of the variable input, the factor proportions become more and more suitable for the production and marginal product increases. But after a certain level of employment, the production process becomes too crowded with the variable input.…” |