Question

Stage II of production begins where the $APP_{Labour}$ begins to decline:

• A. Always
• B. Never
• C. Sometimes
• D. Often

Hint:

Remember the classic transition point: the boundary between Stage I and Stage II occurs where $APP$ is maximized, which means $MPP = APP$. Beyond this point, both $APP$ and $MPP$ decline.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
In microeconomics, the classical short-run production process is divided into three distinct stages based on the behavior of Average Physical Product (APP) and Marginal Physical Product (MPP).

Step 3: Detailed Explanation:
Let us identify the boundaries of the production stages:
- Stage I: Starts from the origin and ends at the point where Average Physical Product (APP) is maximized. Throughout this stage, $MPP > APP$.
- Stage II: Begins at the point where APP is at its maximum and ends where Total Physical Product (TPP) is maximized, which is where Marginal Physical Product is zero ($MPP = 0$).
At the exact boundary between Stage I and Stage II, the APP curve reaches its peak, where $MPP = APP$.
Immediately after this point, as additional units of input are used, the APP curve begins to decline.
Therefore, Stage II of production always begins precisely where the Average Physical Product ($APP_{Labour}$) starts to decline.

Step 4: Final Answer:
Stage II of production begins where the $APP_{Labour}$ begins to decline Always.