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Why does the third stage of negative return come?

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This situation arises when excessive quantities of variable factors adversely affect the efficiency of a fixed factor. The proverb “too many cooks spoil the broth” aptly applies to this situation. In this stage, the quantity of variable factors becomes too excessive relative to the fixed factors so that they get in each other’s way with a result that the total output falls instead of rising. In such a situation, a reduction in the units of the variable factors will increase the total output. It is called the Stage of Negative Returns.

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