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Micro - Ridge Lines
Micro - Ridge Lines
The marginal product of a particular factor may be negative if the quantity used is too large. For
example, if too much labour is used there may be congestion and the efficiency of all the
labourers may be affected. An isoquant will include points denoting such factor quantities,
because it includes all factor combinations producing the same output.
But, a rational producer will not operate on this part of the isoquant. The area of rational
operation may be shown by drawing two lines from the origin enclosing only those parts of the
isoquants where each factor has a positive marginal product. Such lines are called ridge lines.
Negative marginal products appear in that part of the isoquant which has a positive slope.
Ridge lines exclude these parts. This can be seen in Fig. 14. Let us focus our attention on
isoquant Q1 over the interval from point A to point E. We now know that as we substitute
labour for capital and move from A toward E, the marginal productivity of labour diminishes.
This does not make much sense from a managerial perspective. Points B, C and D are
analogous to point A for their respective isoquants. Beyond these points, the marginal
productivity of capital is negative and so we would not wish to operate in that region, which we
refer to as stage I.
The ridge line R marks the boundary between stage I and stage II just as R’ marks the boundary
between stages II and III. We see that neither stage I nor stage III is desirable for production,
since the marginal productivity of at least one input is negative in those stages. We can then
conclude that the only relevant region for production is stage II, which is bounded by the two
ridge lines, R1 and R2. This region is called the economic region of production.