When Marginal productivity starts decreasing but remains positive, Total Productivity is _____.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Increases at diminishing rate.
Based on the law of variable proportions, the relationship between Marginal Productivity (MP) and Total Productivity (TP) is as follows:
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When MP is increasing, TP increases at an increasing rate.
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When MP is positive but decreasing, TP continues to increase, but at a diminishing or decreasing rate.
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When MP is zero, TP reaches its maximum.
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When MP becomes negative, TP begins to decrease.
When marginal productivity (also called marginal product) starts decreasing but remains positive, it means that each additional unit of input still adds to total output, but adds less than the previous unit. As a result, total productivity (or total product) continues to increase, but the rate of increase slows down. This stage is known as the law of diminishing marginal returns.