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In which stage of the Law of Variable Proportions does total product reach its maximum and marginal product become zero?
AEnd of Stage 1, increasing returns
BEnd of Stage 2, diminishing returns
CBeginning of Stage 3, negative returns
DMiddle of Stage 1, point of inflexion
Answer & Solution
Correct answer: B. End of Stage 2, diminishing returns
1. In Stage 2 total product keeps rising at a diminishing rate until it reaches its maximum, where Stage 2 ends.
2. At that maximum point the marginal product of the variable factor is exactly zero.
3. So the answer is the end of Stage 2.
4. Stage 1 ends where AP is maximum (MP still positive), and Stage 3 has already-falling TP with negative MP, so neither matches MP being zero at TP's peak.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.19_
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