A rational producer will never choose to produce in stage 3 where marginal product of the variable factor is where marginal product of the variable factor is negative. Marginal product of the variable factor being negative in stage 3, a producer can always increase his output by reducing the amount of variable factor. It is this clear that rational producer will never be producing in stage 3. Even if the variable factor is free the rational producer stops at he end of the second stage where the marginal producer of the variable factor is zero. At the end of the second stage where the marginal product of the variable factor is zero, the producer will be maximizing the total product and will thus be making maximum use of the variable factor.
A rational producer will also not choose to produce in stage I where the marginal product of the fixed factor is negative. A producer producing in stage 1 means that he will not be making the best use of the fixed factor and further he will not be utilizing fully the opportunities of increasing
Production by increasing Quantity of the variable factor whose average product continues to rise throughout the stage 1. Thus a rational producer will not stop in stage I but will expand further. Even if the fixed factor is free i.e. costs nothing the rational producer will stop only at the end of stage 1, where the marginal product of the fixed factor is zero and the average product of the variable factor is maximum. At the end of the stage 1 he will be making maximum use of fixed factor.
It is thus clear from above that the rational producer will never be found producing i stage land stage 3. A rational producer will always seek to produce in stage 2 where both the marginal product and average product of the variable factor are diminishing. At which particular point in this stage, the producer will decide to produce depends upon the prices of factors. The stage 2 represents the range of rational production decisions.
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