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

The Cobb-douglas production function $Q= K^{1/2} L^{1/3}$ exhibits __________. 

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. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

  4. none of the above

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Correct Option: C
Explanation:

The terms in the equation are raised to coefficients less than 1, this implies for every one unit increase in input the output will increase by less than 1. Thus, this is is a function exhibiting deceasing returns to scale. 

In the standard notation of Cobb Douglas Function, if + = 1,  the production function exhibits _____.

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. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

  4. none of the above

Show answer
Correct Option: A

In the standard notation of Cobb Douglas Function, if the terms are raised to coefficients greater than 1, then the production function exhibits _______.

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. CRS

  2. DRS

  3. IRS

  4. None of the above

Show answer
Correct Option: C
Explanation:

In the standard notation of Cobb Douglas Function, if the terms are raised to numbers greater than 1 then for each one unit increase in input the output will increase by more than 1. eg: $Q(K,L)$ = ${K^3}$${L^6}$ 


Law of variable proportion applies _________.

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. 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

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Correct Option: C

Law of variable proportion applies _______.

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. in the long run

  2. in the short period

  3. on the very long period

  4. all of the above

Show answer
Correct Option: B
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).

Law of increasing returns states that _______.

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. 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

Show answer
Correct Option: A
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.

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

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. constant

  2. zero

  3. increasing

  4. decreasing

Show answer
Correct Option: B

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

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. Convex

  2. Concave

  3. Parallel to x axis

  4. Parallel to y axis

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Correct Option: A

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

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. Labour

  2. Level of technology

  3. Loyalty

  4. None of the above

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Correct Option: A

Which is a true statement?

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. 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

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Correct Option: D