The tendency where marginal productivity first increases then starts falling is known as _____.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Law of variable proportions.
The 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.