Which of the following is NOT correct an respect of the relationship between Average Product and Total Product?
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: None of the above
Explanation:
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When TP increases at an increasing rate, AP rises. (Correct)
- In the initial stage of production, as Total Product (TP) grows rapidly, the Average Product (AP) also rises because inputs are being used more efficiently.
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AP falls when TP is maximum and constant or when TP decreases. (Correct)
- When Total Product reaches its maximum, Marginal Product (MP) becomes zero, and AP starts falling.
- If TP starts decreasing, AP also declines.
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AP falls when TP increases at a diminishing rate. (Correct)
- After AP reaches its peak, it starts declining, even though TP is still increasing but at a slower rate (diminishing returns).
