Will H. answered • 8d
Notre Dame Graduate & AP Economics Teacher Helping Students Excel
There are three stages to production at the Microeconomic level. First, there are increasing marginal returns. This is when there are a few variable resources, typically laborers, working with a set of fixed resources. When few variable resources work together, this creates specialization honing in on the specific skillset and advantages of each variable resource. Next, there comes diminishing marginal returns. This occurs when there are too many variable resources working with a set amount of fixed resources. More and more variables are added into the equation and they only have a limited number of resources to work with, causing them to have a lower marginal product. Lastly, comes negative marginal returns, which occurs because of overcrowding. There are now too many variable resources and they can not perform efficiently because of the lack of space for them to perform their duties well. Hope this helps!
