PRC-3 · Chapter 12 · Question 27 of 69
In the first stage of the law of variable proportions, adding more workers to a factory allows them to specialize and utilize the machinery much more efficiently. What happens to the Marginal Product (MP) curve during this specific stage?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It slopes upward (increases)
Explanation
During Stage I (Increasing Returns), the marginal product of each additional worker rises because the fixed capital is being utilized more efficiently through specialization.
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