Question

Given below are two statements:
Statement (I): Law of diminishing returns is law of diminishing marginal productivity.
Statement (II): When the variable factor becomes more, it can lead to positive value of the marginal product.
In light of the above statements, choose the most appropriate answer from the options given below:

• A. Both Statement (I) and Statement (II) are true.
• B. Both Statement (I) and Statement (II) are false.
• C. Statement (I) is true but Statement (II) is false.
• D. Statement (I) is false but Statement (II) is true.

Hint:

Remember the three stages of production:
Stage 1: Increasing marginal returns (MP is positive and rising).
Stage 2: Diminishing marginal returns (MP is positive but falling).
Stage 3: Negative marginal returns (MP becomes negative).

Answer 1

The Correct Option is C