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

If Stage I = Increasing Returns, Stage II = Diminishing Returns, and Stage III = Negative Marginal Returns, answer the questions:
A Rational Producer will not operate in Stage I due to the reason that -

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. There is more scope for making the best use of the Fixed Factor

  2. Total Output still shows an increasing trend

  3. Optimal Combination of Fixed and Variable Factors is not yet achieved

  4. All of the above

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Correct Option: D

In which stage of production would a rational entrepreneur like to operate?

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. Stage 1 where MP is maximum

  2. Stage 2 where both MP and AP are decreasing, but both are positive

  3. Stage 3 where MP is negative

  4. Either Stage 2 or 3

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Correct Option: B

A Rational Producer intends to work in-

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. Stage of Constant Returns

  2. Stage of Increasing Returns

  3. Stage of Diminishing Returns

  4. Stage of Negative Returns

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Correct Option: C

You are given the following data:

Factor Output
0 0
1 15
2 35
3 60
4 92
5 140

The above data is an example of:

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. Decreasing returns to scale.

  2. Constant returns to scale.

  3. Increasing returns to scale.

  4. Positive fixed costs.

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Correct Option: C

If a change in scale inputs leads to a proportional change in the output, it is a case of-

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. Increasing Returns to Scale

  2. Constant Returns to Scale

  3. Diminishing Returns to Scale

  4. Variable Returns to Scale

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Correct Option: B

If as a result of a 50% increase in all inputs, the output rises by 75%, this is a case of:

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. Increasing Returns to a Factor

  2. Increasing Returns to Scale

  3. Constant Returns to a Factor

  4. Constant Returns to Scale

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Correct Option: B

In the very beginning of production generally, the Increasing Returns to scale is found because-

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. Input is increased

  2. Plant and Machinery will be new

  3. Production Problems are less

  4. Economies of Scale

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Correct Option: D

A rational producer will always operate in which stage of law of variable proportion?

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. increasing returns.

  2. diminishing returns.

  3. constant returns.

  4. negative returns.

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Correct Option: B

Second stage of law of variable proportion ends where __________.

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. MP is zero

  2. AP is maximum

  3. MP is falling

  4. none of the above

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Correct Option: A

Returns to scale means ________________.

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

  1. the behaviour of production or return when all the production factors are increased or decreased simultaneously in the same ration

  2. the behaviour of production where one or two factors of production are fixed while the others are variable

  3. the marginal returns goes on increasing as more labour is invested in industry.

  4. the behaviour of production, when changes are made in factor proportions, keeping on or some factors fixed

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Correct Option: A
Explanation:

In the long run all factors are varied, the proportion of inputs while kept same is scaled up or down in order to produce at the minimum efficiency scale (long run minimum average cost) . Thus as the entire scale of production is changing, this phenomenon is know as returns to scale.