Why does a producer prefers 2nd stage of production?

For a producer, the most viable and feasible stage of production is the second stage of production. This is because as compared to the first and the third stage, the second stage provides the best conditions for efficient production. In the first stage of production, the marginal product of the labour is positive which implies that the production or the total output can be increased by employing more of labour units with the same quantity of fixed factor. That is, if the producer puts in more labour, then higher units of output can be produced. Also, in this stage, the labour units do not utilise the fixed factors to the optimum level as higher labours implies higher output. Thus, if a producer starts producing in the first stage, then in an attempt to raise the production by increasing the labour inputs, he will surely reach the second stage of production.

Now, as compared to this, in the third stage, the production can be increased by reducing or shedding the numbers of labour. This is because the addition to the total output by the additional labour unit (i.e. marginal product) is negative. This implies that employing more labour would not contribute anything to the total product but infact will add to cost of production in form of additional wages. Thus, the producer will not produce in the third stage as well.

Therefore, the only viable and economically feasible stage is the second stage of production wherein the MP, AP and TP all are positive and the available fixed factors are fully utilised. This is the most efficient stage where the productivity of the factors is the maximum. Hence, a rational producer would always like to operate in this stage.

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because in 1 stage ,employment of every additional unit of the variable factor is giving more and more marginal output.and in the third stage emplyement of every additional unit of variable factor is giving less less of total output.. so producer will stop only in the stage 2 where he will find his equilibrium when mp is declining but is still positive.

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