Question

How do Total Product, Average Product and Marginal Product behave under the Law of Increasing Returns to a Factor? Briefly explain one reason for the operation of this law.

Answer 1

Under the Law of Increasing Returns to a Factor, the behaviour of Total Product (TP), Average Product (AP), and Marginal Product (MP) is as follows:

• Total Product (TP) increases at an increasing rate.
• Marginal Product (MP) rises and reaches its maximum.
• Average Product (AP) also increases, but at a slower rate than MP.

Reason: This occurs due to better specialisation and division of labour, which enhances efficiency and output per unit of the variable factor.