Indicate whether each of the following statements is true or false and give the reason. (a) A firm should stop expanding output after reaching diminishing returns and (b) if large and small firms operate in the same industry, we must have constant returns to scale.
Total, Marginal, and Average Product Curves, and Stages of Production With Labor time continuously divisible, we smooth TP, MP, and AP curves. The MPL (given by the slope of the tangent to the TP curve) rises up to point G , becomes zero at J , and is negative thereafter. The APL (given thereafter (but remains positive as long as TP is positive). Stage I of production for labor corresponds to the rising portion of the APL .Stage II covers the range from maximum APL to where MPL is zero. Stage III occurs when MPL is negative.
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