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Production function - class-XII

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A firm can quit the industry in the short run.
  1. True

  2. False


Correct Option: B
Explanation:

Quitting is not possible in the short run because short run, by definition, is a period of time which is too short for the existing firms to quit the industry or for any new firms to enter the industry. Therefore, a firm can quit the industry only in the long run.

A short-run production function is one which has ___________.

  1. at least one fixed factor

  2. all fixed factors

  3. all variable factors

  4. at least one variable factor


Correct Option: A

In a small scale rubber plant, factors of production like labour, material and capital are increased by 10% and output increases. It implies that the Firm is experiencing  ________.

  1. Constant Returns to Scale

  2. Decreasing Returns to Scale

  3. Increasing Returns to Scale

  4. Increasing as well as decreasing


Correct Option: C

Law of Returns to Scale indicates the responsiveness of total product when all inputs ________________.

  1. Remain same

  2. Are changed drastically

  3. Are changed marginally

  4. Are changed proportionately


Correct Option: D

Which of the following is an assumption in the Law of Variable Proportions?

  1. The Fixed Factor of production is scarce

  2. There are no perfect substitutes for the Fixed Factor

  3. Factors of Production can be used in any proportion

  4. All of the above


Correct Option: D

In the long run _________. 

  1. all inputs, such as labour, equipment and offices or factories can be varied, and so total variable cost is equal to total cost since fixed cost is equal to zero

  2. all inputs except labour can be varied, and so total variable cost remains unchanged but fixed cost is equal to zero

  3. all inputs, such as labour, equipment and offices or factories can be varied, and so average fixed cost is lower

  4. All inputs such as labour, equipment and offices or factories can be varied, and so total variable and fixed cost are lower


Correct Option: A
Explanation:
In the long run all factors are varied. The proportion of inputs are scaled up or down in order to produce at the minimum efficiency scale (long run minimum average cost). Thus, in the long run the total cost is the total variable cost as there is no fixed cost involved.

In the long run production function all inputs are fixed.

  1. True

  2. False

  3. Partly true

  4. None of the above


Correct Option: B
Explanation:

In the long run all factors are variable as the firm has enough time and other resources to vary any of its factors of production.

The term ______ is defined as that length of time over which the firm gets an opportunity to vary if need be the quantities of all its inputs.

  1. short run

  2. long run

  3. very short period

  4. all of the above


Correct Option: B
Explanation:
Long run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the long run when it has the opportunity to vary all factors of production.

Which of the following statement is true?

  1. In short run, some of the factors of production are fixed and other may vary.

  2. In short run, all the factors of production are fixed.

  3. In short run, all the factors of production are variable.

  4. In short run, there are no fixed factors of production.


Correct Option: A
Explanation:
Short run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the short run as long as at-least one factor of production is fixed. 

In describing a given production technology, the short run is best described as lasting __________.

  1. upto six months from now

  2. upto five years from now

  3. as long as all inputs are fixed

  4. as long as at least one input is fixed


Correct Option: D
Explanation:

Short run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the short run as long as at-least one factor of production is fixed. 

The "law of diminishing returns" applies to _________.

  1. the short run, but not the long run

  2. the long run, but not the short run

  3. both the short run and the long run

  4. neither the short run nor the long run


Correct Option: A
Explanation:

For the law of diminishing return to operate at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns to operate.

"Law of diminishing returns" or "Law of variable proportion" operate in ___________.

  1. long run

  2. short run

  3. very long period

  4. none of the above


Correct Option: B
Explanation:

For the law of diminishing returns or variable proportions to operate, at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns or law of variable proportions to operate.

To economists, the main difference between the short run and the long run is that _____________.

  1. in the short run all inputs are fixed, while in the long run all inputs are variable

  2. in the short run the firm varies all of its inputs to find the least-cost combinations of inputs

  3. in the short run, at least one of the firm's inputs levels is fixed.

  4. in the long run, the firm is making a constrained decision about how to use existing plant and equipment efficiently


Correct Option: C
Explanation:

The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run. In the long run all factors are variable as producers have enough time to organize all factor inputs in the appropriate proportions to achieve the minimum efficient scale.

The short run is characterized by ___________.

  1. at least one fixed factor of production and firms neither leaving nor entering the industry

  2. a period where the law of diminishing returns does not hold

  3. no variable input, i.e., all of the factors of production are fixed

  4. all inputs being variable


Correct Option: A
Explanation:

The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run. Firms in perfect competition can make super normal/subnormal profits in the short run as firms are allowed to enter and exit the market only in the long run.

In economics, ________ is a period where some factor inputs are fixed, while the others are variable.

  1. long run

  2. short run

  3. very long period

  4. none of the above


Correct Option: B
Explanation:

The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run. It is in the long run all factors are variable as producers have enough time to organize all factor inputs in the appropriate proportions to achieve the minimum efficient scale.

In economics, _______ is a period where all factors/inputs are variable.

  1. long run

  2. short run

  3. very short period

  4. none of above


Correct Option: A
Explanation:

In the long run all factors are variable as producers have enough time to organize all factor inputs in the appropriate proportions to achieve the minimum efficient scale.

Whether a firm will plan for short-run or long-run production depends upon the __________.

  1. nature of demand for its product

  2. availability of inputs

  3. state of technology

  4. all of the above


Correct Option: D

In the short run with the increase in output ____________.

  1. The fixed cost also increases

  2. Total variable cost increase in totality but total fixed cost remain same

  3. Total variable cost falls along with fixed cost

  4. Average variable cost falls


Correct Option: B

Which of these statement is more appropriate for Fixed costs ____________?

  1. Fixed cost is fixed only in short run

  2. It is fixed in long run also

  3. It varies with the change in level of output

  4. It is strictly avoidable in short run also


Correct Option: A

____ refers to that period in which supply of a commodity can be increased or decreased depending upon changed condition of demand. 

  1. Very short period

  2. Short period

  3. Long period

  4. Very long period


Correct Option: C

In the long run ___________.

  1. all inputs are fixed

  2. all inputs are variable

  3. some inputs are fixed and rest are variable

  4. a few are variable and rest are fixed


Correct Option: B
Explanation:

In the long run all inputs are variable as there is enough time for all factors to adjust according to the requirements for achieving least cost output. 

In short run when the level of production increases, average fixed cost will____.

  1. remain same

  2. decrease

  3. increase

  4. all the three possible depending upon the merit of case


Correct Option: B
Explanation:
The AFC curve is asymptotic to to both the x and y axis as the fixed cost can never be 0 since fixed cost is positive. It slopes downwards throughout its length from left to right showing continuous fall in average fixed cost with an increase in output. 

In the case of very short period ______ is variable.

  1. land

  2. capital

  3. labour

  4. none of the above


Correct Option: D

The period of time in which the plant capacity can be varied is known as __________.

  1. the short period

  2. the market period

  3. the long period

  4. all of the above.


Correct Option: C

In the long run there is enough time for the firm to cover its losses and earn normal profits. This is because in the long run, all inputs are __________.

  1. identical

  2. homogenous

  3. variable

  4. fixed


Correct Option: C
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