Tag: total product, average product and marginal product

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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

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

  1. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
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. 

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

  1. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

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

In a Cobb-Douglas production function Q = A * L^a * K^b, the sum of the exponents (a + b) determines the returns to scale. If a + b = 1, the function exhibits constant returns to scale.

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

  1. CRS

  2. DRS

  3. IRS

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
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}$ 


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.