Question

What will happen to MP (marginal product), when TP (total product) increases at an increasing rate?

Hint:

When TP increases at an increasing rate, the firm experiences increasing returns to the variable factor, leading to an increase in MP. This stage signifies enhanced productivity.

Answer 1

Step 1: Understanding the Concept of Total Product (TP) and Marginal Product (MP):
- Total Product (TP): Refers to the total quantity of output produced by a firm using a given quantity of inputs over a period of time.
- Marginal Product (MP): This is the additional output produced by using one more unit of a particular input, while keeping other inputs constant. MP is essentially the change in TP when an additional unit of input is added.
Step 2: Examining the Relationship Between TP and MP:
When TP increases at an increasing rate, this means that the firm is becoming more efficient at using its inputs. It signifies that the marginal product is increasing as more units of input are employed. This stage reflects increasing returns to the variable factor because each additional unit of input is contributing more to total output than the previous one.
Step 3: Mathematical Explanation:
Mathematically, if the second derivative of TP is positive, it shows that TP is increasing at an increasing rate. In such a case, MP will continue to rise. This is a sign of increasing marginal returns.
Step 4: Final Conclusion:
As the total product increases at an increasing rate, the marginal product (MP) will also increase. This is because more output is being produced by each additional unit of input, reflecting greater efficiency in the production process.