The law of variable proportion state that if the quantities of variable factor of production are used with fixed factor, after a certain point,

Step 1: Analyze the question The question asks what the Law of Variable Proportions says happens when more and more units of a variable factor (e.g. labour) are added to a fixed factor (e.g. land or capital), after a certain point.

Step 2: Explain the concept The Law of Variable Proportions (also called the Law of Diminishing Returns) states that when units of a variable factor are added to a fixed factor, output at first may rise at an increasing rate. After a certain point, however, each extra unit of the variable factor adds less to total output than the one before it. The fixed factor becomes overcrowded or overworked.

Step 3: Walk through the stages Take a small farm of fixed size (1 hectare) and add more workers:

| Workers | Total Product | Marginal Product | |---|---|---| | 1 | 10 | 10 | | 2 | 24 | 14 (increasing) | | 3 | 36 | 12 (decreasing starts) | | 4 | 44 | 8 | | 5 | 48 | 4 |

After the second worker, the marginal product (the extra output from each additional worker) keeps falling. That is the "certain point" mentioned in the question.

Step 4: Check the options

• A. Decreasing marginal product. This is correct, and it is exactly what the law states.
• B. Equal increase in marginal product. This describes constant returns, not the law.
• C. Increasing marginal product. This is only true before the "certain point."
• D. "Four times increase". This has no basis in economic theory.
• E. More than equal increase. This is the same idea as increasing returns, which is wrong after the turning point.

Answer: A

Exam tip: Whenever you see the phrase "after a certain point" with a fixed factor, think diminishing marginal returns. Remember it as: "Too many cooks spoil the broth." Adding more workers to the same small kitchen eventually adds less and less.