Tag: laws of returns - returns to a factor and returns to scale

Questions Related to laws of returns - returns to a factor and returns to scale

In the long run _________. 

economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  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

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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.

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

economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  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

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Correct Option: D

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

economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  1. Remain same

  2. Are changed drastically

  3. Are changed marginally

  4. Are changed proportionately

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Correct Option: D

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  ________.

economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  1. Constant Returns to Scale

  2. Decreasing Returns to Scale

  3. Increasing Returns to Scale

  4. Increasing as well as decreasing

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Correct Option: C

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

economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  1. at least one fixed factor

  2. all fixed factors

  3. all variable factors

  4. at least one variable factor

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Correct Option: A
A firm can quit the industry in the short run.
economics laws of returns - returns to a factor and returns to scale production and costs production function producer behaviour and supply total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function land land,labour, capital and entrepreneur how does production take place?

  1. True

  2. False

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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.

Which of these can be described as implicit cost of production?

economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

  1. National rent of own office building

  2. Payment of wages to workmens

  3. Normal profit on capital employed

  4. Interest on loan

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Correct Option: A

The difference between the least cost output and actual output level is termed as____.

economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

  1. Excess capacity

  2. Unbalanced capacity

  3. Balance capacity

  4. Bottleneck capactiy

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Correct Option: A
Explanation:

The least cost output is the level of optimal efficiency. This is achieved when all factors of production are employed in their most productive form. Thus when the average cost is higher than least cost it signifies the presence of inefficiencies in the economy. and thus the gap is termed as excess capacity as all resources are not employed in the most optimal way.

In which stage of production are the Average Product and Marginal Product decreasing with the Marginal Product above zero (positive)?

economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

  1. In the stage of Constant Returns

  2. In the stage of Decreasing Returns

  3. In the stage of Increasing Returns

  4. Both (a) and (c)

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Correct Option: B

In the stage of Diminishing Returns, Marginal Product (MP)-

economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

  1. First increases, reaches a maximum and then decreases

  2. Decreases

  3. Increases

  4. Remains constant

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Correct Option: B