The 3 Production Phases

The three production phases are increasing returns to scale, constant returns to scale, and decreasing returns to scale.

In the production phase of negative returns, increases in variable inputs lead to a decrease in the total output.

Questions

• What are the three production phases?
• What is the production phase of negative returns?
• How do increases in variable inputs lead to a decrease in the total output in the production phase of negative returns?

Answers

• The three production phases are increasing returns to scale, constant returns to scale, and decreasing returns to scale.
• The production phase of negative returns is the third and final production phase. In this phase, increases in variable inputs lead to a decrease in the total output. This is because the additional output produced by each additional unit of input is less than the output produced by the previous unit of input.
• As the number of workers increases, the total output of cookies produced per day increases at a decreasing rate. This means that each additional worker adds less and less output to the total. Eventually, the point is reached where adding more workers actually decreases the total output.