Capital is held fixed. The total product (TP) of labour is given below:
| Labour (units) | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| TP (units) | 8 | 20 | 36 | 48 | 55 | 58 |
Which of the following is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Diminishing marginal product sets in from the 4th unit, and AP is the same (12 units) with 3 and with 4 workers.
Given:
Labour: 1, 2, 3, 4, 5, 6 units
TP: 8, 20, 36, 48, 55, 58 units
MP is the change in TP from one more worker. AP is TP divided by labour.
\( MP: 8,\ 12,\ 16,\ 12,\ 7,\ 3 \)
\( AP: 8,\ 10,\ 12,\ 12,\ 11,\ 9.67 \)
MP is highest at the 3rd worker and falls from the 4th. AP is 36 / 3 = 12 and 48 / 4 = 12, the same, because MP of the 4th worker equals AP (12). AP falls only from the 5th worker.
Option (1) Diminishing marginal product sets in from the 5th unit, because TP rises by a smaller amount only after 4 units. — Incorrect. MP already falls at the 4th unit (16 to 12).
Option (2) Diminishing marginal product sets in from the 4th unit, and AP is the same (12 units) with 3 and with 4 workers. — Correct. Both parts match the working.
Option (3) Diminishing marginal product sets in from the 3rd unit, because AP is highest at the 3rd unit. — Incorrect. MP still rises at the 3rd unit (12 to 16).
Option (4) Diminishing marginal product sets in from the 4th unit, and AP also starts falling from the 4th unit. — Incorrect. AP does not fall at the 4th unit; it stays at 12.
NCERT (2026-27): “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions … Notice that the MP first increases (upto 3 units of labour) and then begins to fall. 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.” “3.5 Shapes of Total Product, Marginal Product and Average Product Curves … Let us now see what the AP curve looks like. For the first unit of the variable input, one can easily check that the MP and the AP are same. Now as we increase the amount of input, the MP rises. AP being the average of marginal products, also rises, but rises less than MP. Then, after a point, the MP starts falling. However, as long as the value of MP remains higher than the value of the AP, the AP continues to rise. Once MP has fallen sufficiently, its value becomes less than the AP and the AP also starts falling. So AP curve is also inverse ‘U’-shaped.” |