Question

What Stage of Production is represented by a 5-worker crew? How did you know that, and why do you think that would occur? [Hint: Think about diminishing marginal returns. Relate your answer to this principle]

Answer 1

There are 3 stages of production. Each stage of production represents a different level of total, average and marginal product.

A 5 worker crew would represent second stage of production. The reason that these many workers will lie in the second stage of production is that, with fixed input when 5 variable inputs will work, the law of diminishing marginal returns will start working. Total output will increase but at a decreasing rate when there is a 5 worker crew.

Since the fixed inputs are the same but variable inputs increase more compared to first stage of production, the marginal product will increase at a decreasing rate which will show that law of marginal returns is working.

If workers are increased more, then after sometime third stage of production will start.