Question

Identify the phase in which TP increases at an increasing rate and MP also increases.

Options

• Increasing returns to a factor.

• Diminishing returns to a factor

• Negative returns to a factor

• None of these.

Answer 1

Increasing returns to a factor.

Explanation:

Returns to a factor go through three stages: In the first phase, rising returns to a factor, where TP grows at a faster pace and MP grows at the same time.