Three stages of production and law of diminishing

i) What are the key points in short run production function that delineate the three stages of
production?
ii) Explain the relationship between the law of diminishing returns and three stages of production.

PRODUCTION STAGES - The three stages of production are characterized by the slopes,
shapes, and interrelationships of the total, marginal, and average product curves. The first stage
is characterized by a positive slope of the average product curve, ending at the intersection
between the average product and marginal product curves; the second stage by continues up to
the point in which the marginal product becomes negative, at the peak of the total product
curve; and T the third stage exists over the range in which the total f "production curve is
negatively sloped.

In Stae I, the product is positive and increasing. In Stage ii final product is positive, but
decreasing. And in stage Ill, total product is decreasing.

Stage I - The total product curve has a positive slope, where the Marginal product is greater
than average product. Marginal product initially increases, this decreases until it is equal to
average product at the end of Stage I. - Average product is positive and the average product
curve has a positive slope.

Stage II - The total product curve has a decreasing positive slope. In other words, the slope
becomes flatter with each additional unit of variable input. - Marginal product is positive and
the marginal product curve has a negative slope. The marginal product curve intersects the
horizontal quantity axis at the end of Stage II. - Average product is positive and the average
product curve has a negative slope. The average - product curve is at its a peak at the onset of
Stage, at this peak, average product is equal to the final product.
Stage III - The total product curve has a negative slope. It has passed its peak and is heading
down. - Marginal product is negative and the marginal product curve has a negative slope. The
marginal product curve has intersected with the horizontal axis and is moving down. - Average
product remains positive but the average product curve has a negative slope.

‘' Law of Diminishing return and Three Stages - These three distinct stages of short-run
production are not equally important. Stage I, with largely increasing marginal returns, is a
great place to visit, but most firms move through it quickly. Because each variable input is
increasingly more productive, firms employ as much as they can, as quickly as they can.

Stage III, with negative marginal returns, is not particularly attractive to firms. Production is
less than it would be in Stage II, but the cost of production is greater due to the employment of
the variable input. There is not much benefit at this stage.