The main reason a firm experiences increasing returns at the initial stage of the Law of Variable Proportions is that:

1. Increasing returns occur because the fixed (often indivisible) factor is abundant relative to the variable factor at first. 2. Adding more variable factor leads to fuller and more efficient use of the fixed factor, plus gains from division of labour. 3. So the cause is fuller utilisation of the fixed factor. 4. An excessive variable factor causes negative returns, technology is assumed unchanged, and doubling all factors belongs to returns to scale, not this law. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.19_