The "classical" production function is depicted in Figure 5-1, on p. 139 of your textbook,

with three (3) stages of production that are demarcated by the vertical lines in the diagram. Specifically, Stage I of production is the range of the variable input usage up to the first vertical line (variable input usage between the y-axis and the first vertical line) in Figure 5-1; Stage II is the range of variable input usage from the first vertical line to the second vertical line in Figure 5-1 (the middle section of the graph); and State III is the range of variable input usage beyond State II (variable input usage beyond the second vertical line in Fig. 5-1). Carefully describe the characteristics of Stage II of the classical production function with regard to Total Product, Marginal Product, and Average Product of the variable input, labor.

(c)Explain why Stage II is considered the rational stage of production.

gure 5-1, we see labor are employed. As the usage of labor increases from the 5th through the 1 output increases, but at a decreasing rate. This is why marginal product dec and 10 units of labor but is still positive. The range over which marginal produ It declining is known as the range of decreasing or diminishing marginal ret able input. ure 5-1, marginal product becomes negative when more than 10 units of lab After a point, using additional units of input actually reduces total product, v means for marginal product to be negative. The range over which marginal pr is known as the range of negative marginal returns. Total product, Increasing Decreasing Negative average product, marginal marginal marginal marginal product returns returns returns to to to labor labor labor H K G Total F product (TP ) E D C B A a APL Variable 0 1 2 3 4 5 6 7 8 9 10 11 input (labor) MPL