A rational producer will choose to operate in which stage of the Law of Variable Proportions?

1. A rational producer avoids Stage 3 because marginal product is negative there, so output can be raised simply by using less of the variable factor. 2. He also avoids Stage 1 because the fixed factor is under-utilised and AP is still rising, so more variable factor would still help. 3. Stages 1 and 3 are called economic absurdity; the producer therefore operates in Stage 2. 4. The answer is Stage 2, diminishing returns. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.20_