Read the following statements - Assertion (A) and Reason (R):
Assertion: The marginal product of a factor input initially rises but after a certain level, it starts falling.
Reasoning: Initially, with increase in amount of the variable input, the factor proportions become more & more suitable for production. After a certain level, the production process becomes too crowded with the variable input.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 4
The correct answer is option 4: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Explanation:
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Assertion (A): The marginal product of a factor input initially rises but after a certain level, it starts falling. (True)
- This follows the Law of Variable Proportions, which states that as more units of a variable input (e.g., labor) are added to a fixed input (e.g., land or machinery), MP initially increases, reaches a peak, and then starts falling due to diminishing returns.
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Reason (R): Initially, with an increase in the amount of the variable input, the factor proportions become more suitable for production. After a certain level, the production process becomes too crowded with the variable input. (True and correctly explains A)
- Early stage: Adding more labor to fixed capital improves efficiency (e.g., better division of labor).
- Later stage: When too many workers are added to a fixed input (e.g., a small piece of land or a single machine), they become overcrowded and less productive, leading to diminishing marginal returns.