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In the short run, how does a business manager make wise use of the relationship between...

In the short run, how does a business manager make wise use of the relationship between the marginal product, the average product, and the total product to help determine the point at which maximum output efficiency is achieved?

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Answer #1

In the short run production process, one input factors are fixed and remaining factors are variable and it results in operation of diminishing returns.because of following reasons.

  • Fixed factors are scarce factors
  • Factors are not perfectly divisible.
  • After certain point fixed factors over-utilized in connection with variable factors.

The maximum output efficiency is achieved when Total product highest and Marginal products contribution of additional units variable factors is zero.The beyond the point of the marginal products becomes negative.

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