Tag: production and costs

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Questions Related to production and costs

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Law of variable proportion applies _________.

  1. when all inputs are variable

  2. when all inputs are fixed

  3. some inputs are fixed and one input is variable

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The law of variable proportions describes the short-run production process where at least one factor of production is fixed, while others are varied.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Law of variable proportion applies _______.

  1. in the long run

  2. in the short period

  3. on the very long period

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
It is only possible for the law of variable proportions to operate under specific conditions. 
1. The state of technology is given and remains unchanged
2. It is assumed that some inputs are fixed while others are varied. As it is only then that the factor proportions can be changed. 
3. It is assumed that technology is such that it is possible to change the factor proportions. The law will not apply in situations where the factors of production must be used in fixed proportions. 
4. It is assumed that all the units of the variable factor are homogeneous and are equally efficient. (eg every worker hired is equally efficient).
Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Law of increasing returns states that _______.

  1. proportionate increase in production is more than the proportionate increase in inputs

  2. additional unit of variable input causes increase in total production

  3. additional unit of fixed input causes increase in production at increased rate

  4. additional unit of total input cause increases in total output at increased rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Increasing returns to scale: If increase in output is more than proportionate to an increase in quantity of all inputs, returns to scale are said to be increasing. The terms in the standard Cobb-Douglas function are raised to coefficients greater than 1.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

If factor inputs are complementary to each other the marginal rate of technical substitution will be ______.

  1. constant

  2. zero

  3. increasing

  4. decreasing
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If inputs are perfect complements (Leontief production function), they must be used in a fixed ratio. Therefore, the marginal rate of technical substitution (MRTS) is zero because you cannot substitute one for the other without changing the output.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

In case of Cobb -Douglas Production function the IQ curve is generally_____________.

  1. Convex

  2. Concave

  3. Parallel to x axis

  4. Parallel to y axis
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Cobb-Douglas production function exhibits diminishing marginal rates of technical substitution, which results in isoquants (IQ curves) that are convex to the origin. This shape reflects the principle that as more of one input is used, it becomes progressively less effective at substituting for the other input.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

In the production equation Qx = f(L,K,T...n), L is _______________.

  1. Labour

  2. Level of technology

  3. Loyalty

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In standard production function notation, Q represents output, f represents the functional relationship, and the variables inside the parentheses represent inputs. L is the standard abbreviation for Labor, while K typically denotes Capital.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Which is a true statement?

  1. Constant return to scale is a short-run concept, and decreasing returns to scale is a long-run concept.

  2. Increasing returns to scale is a short-run concept, and diminishing returns to production is a long-run concept.

  3. Decreasing returns to scale and diminishing returns to production are two ways of stating the same thing.

  4. None of the above is true
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Returns to scale is a long-run concept where all inputs change proportionally. Diminishing returns to production (or diminishing marginal returns) is a short-run concept where at least one input is fixed. Since none of the provided statements correctly define these relationships, the final option is the only accurate choice.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Direct costs are _______________.

  1. Traceable costs

  2. Indirect costs

  3. Implicit costa

  4. Explicit costs
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Direct costs are expenses that can be specifically and easily traced to a particular cost object, such as a product, service, or department. They are synonymous with traceable costs.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Returns to scale have been classified as constant, increasing and decreasing depending upon the __________________.

  1. inputs required to produce a given level of output

  2. amount of output produced out of a given amount of inputs

  3. response of output to a change in scale

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Returns to scale describe how output changes when all inputs are increased by the same proportion. This encompasses the relationship between input scaling and output response, making all the listed factors relevant to the classification.

Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

In electricity generation plants, when the plant grows too large risks of plant failure with regard to output increase disproportionately. Hence we are talking about which concept of returns to scale?

  1. Constant Returns to Scale

  2. Increasing Returns to Scale

  3. Decreasing Returns to Scale

  4. Balanced Returns to Scale
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Decreasing returns to scale occur when a proportional increase in all inputs leads to a less than proportional increase in output. In large-scale operations like power plants, inefficiencies or management difficulties can lead to this outcome.