Tag: total product, average product and marginal product

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Multiple choice 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?

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
Reveal answer Fill a bubble to check yourself
A Correct answer
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.
Multiple choice 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?

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
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Law of Variable Proportions assumes that factors are not perfect substitutes, the fixed factor is scarce, and factors can be combined in different proportions. Therefore, all these are valid assumptions.

Multiple choice 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?

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
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Returns to Scale examines the relationship between output and inputs when all inputs are changed in the same proportion. It describes the long-run production function.

Multiple choice 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?

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
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When inputs are increased by a certain percentage and output increases by a greater percentage, the firm is experiencing increasing returns to scale. In this case, a 10% increase in inputs leads to a more than 10% increase in output.

Multiple choice 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?

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
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A short-run production function is defined by the existence of at least one fixed factor of production, which limits the firm's ability to adjust all inputs simultaneously.

Multiple choice 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?
A firm can quit the industry in the short run.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

Multiple choice 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

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

  1. National rent of own office building

  2. Payment of wages to workmens

  3. Normal profit on capital employed

  4. Interest on loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Implicit costs are the opportunity costs of using resources already owned by the firm, such as the rent that could have been earned from an owned building.

Multiple choice 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

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

  1. Excess capacity

  2. Unbalanced capacity

  3. Balance capacity

  4. Bottleneck capactiy
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

Multiple choice 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

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

  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)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the stage of diminishing returns, both Average Product and Marginal Product are declining, but Marginal Product remains positive until it hits zero at the end of the stage.

Multiple choice 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

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

  1. First increases, reaches a maximum and then decreases

  2. Decreases

  3. Increases

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

By definition, the stage of diminishing returns is characterized by a declining marginal product of the variable factor.