Question

identify stages of production why a firm will not produce either in stage 1 or stage 3? explain briefly

Answer 1

The three stages of production function are characterized by the slope and shape of the total product curve. The first stage is an increasingly positive slope, the second stage by a decreasingly positive slope, and the third stage is a negative slope.

In Stage I, marginal product is positive and increasing; In Stage II, marginal product is positive, however decreasing; and finally in Stage III, marginal product is negative. Short-run production by a firm typically encounters three distinct stages because as a larger amounts

Stage II, with decreasing however positive marginal returns, gives a range of production that is suitable to majority of firm. Although marginal product declines, however an employment of an additional variable input does add to total production. Moreover the firms quickly move from Stage I to Stage II, and put all efforts to avoid moving into Stage III. Thus the firms will not produce either in stage 1 or stage 3, and can profitably, produce forever and ever in Stage II.