What is the third stage of production?

The third stage of production, often referred to as the "diminishing returns" stage, occurs when the addition of more inputs results in lower incremental increases in output. In this stage, while total production may still be increasing, the marginal product of each additional input begins to decline. This typically happens after optimal utilization of resources, where factors such as labor or capital become less efficient. As a result, firms may face increasing costs and must evaluate their production strategies to maintain efficiency.