Assertion (A): In the short run, a producer operates in only II stage of Law of Diminishing Returns Where average product of variable factor is…

CA Foundation · Business Economics · MTP · January 2026
Assertion (A): In the short run, a producer operates in only II stage of Law of Diminishing Returns Where average product of variable factor is declining. Reason (R): In stage I and stage III the marginal product of the fixed and the variable factors respectively are negative.
(A) A. (A) is true and (R) is false
(B) B. Both (A) and (R) are true & (R) is the correct explanation of (A)
(C) C. Both (A) and (R) are true & (R) is not the correct explanation of (A)
(D) D. (A) is false and (R) is true

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. Both (A) and (R) are true & (R) is the correct explanation of (A)

Topics: Theory of Production and Cost

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