Question

If in the short run a firm's total product is increasing, then its:

A. marginal product must also be increasing.
B. marginal product must be decreasing.
C. marginal product could be either increasing or decreasing.
D. average product must also be increasing.

Answer 1

In the short run, if a firm's total product is increasing, its marginal product could be either increasing or decreasing due to the law of diminishing marginal productivity.

Step-by-step explanation:

If in the short run a firm's total product is increasing, then its marginal product (MP) could be either increasing or decreasing. This is because as more units of a variable input (like labor) are added to fixed inputs (like equipment), the additional output generated by each additional unit of input initially grows, which means MP is increasing. However, after reaching a certain point, the law of diminishing marginal productivity states that the MP will begin to decline. This decline in MP while total product is still increasing is due to factors such as overcrowding or limited equipment which make additional workers less productive. When the firm's production displays diminishing marginal productivity, if the MP of the last worker is still positive, the total product will continue to increase even though MP is decreasing.