Odisha State Board CHSE Odisha Class 12 Economics Solutions Chapter 5 Production Questions and Answers.
CHSE Odisha 12th Class Economics Chapter 5 Question Answer Production
Group – A
Short type Questions with Answers
I. Answer within Two/Three sentence.
Question 1.
What is Production ?
Answer:
Production refer to the creation of new goods having value-in-exchange. Hence it creates utility.
Question 2.
What are the stages of Law of variable propertions ?
Answer:
Law of variable proportions operates when some factors are fixed (indivisible) & some factors are variable. In the production process, there observed three stages like stage of increasing returns, stage of diminishing returns & stage of negative returns.
Question 3.
Which is the suitable stage of production ?
AnsWER:
In stage of diminishing returns (second stage) the total product becomes maximum & marginal product of the factor is zero. So it is considered as suitable stage of production.
Question 4.
What happens to the factors in the Long-run ?
Answer:
There are somefactors like building, machineries etc which are indivisible & lumpy in size & hence there supply can not be changed in short-period. As long-run is a pretty long-time, all these factors can be varied & so all the factors are said to be variable in the long-run.
Question 5.
Why does the Law of variable proportions operate ?
Answer:
Because of indivisibility of fixed factors, the return from these factors increases at an increasing rate then diminishing rate with the increase in the quantum of variable factors. It happens due to the gradual effective utilisatiion of these fixed factors & hence law of variable proportions operates with three distinct stages.
Question 6.
Which is the prime factor in the short run ?
Answer:
In short-run, the fixed factor remains unchanged & any change in level of output happens due to change in variable factor. So the variable factors are prime factors in the short run.
Question 7.
Which factor remains unchanged in the short-run ?
Answer:
Fixed factor like building, machinery etc. are indivisible & lumpy. So in the short-run, fixed factors remain unchanged.
Question 8.
In which stage the Production is carried on ?
Answer:
During the stage of diminishing returns, the total product becomes maximum. So it is rational to carry on production during this stage.
Question 9.
Why is the Law of Diminishing Returns more applicable to agriculture ?
Answer:
The law is applicable to agriculture because of ineffective supervision, natural influences, no division of labour, limited land, fall in the fertility of land etc.
Question 10.
Why is the Law of Increasing Returns called law of Decreasing Cost ?
Answer:
It is because as more and more doses of labour and capital are employed initially, the average cost falls as the total product increases at an increasing rate.
Question 11.
What is Average Product (AP)
Answer:
Average product is calculated by dividing the total product by the units of variable factors of production. This is also called per unit production cost of a factor.
Question 12.
What is Marginal Product (MP)
Answer:
The rate at which the total product increases is called marginal product. Marginal product is the addition made to the total product by an increase in one more unit of variable factor of production.
Question 13.
What is total product ?
Answer:
Total product refers to the total amount of goods and services produced with the help of factors of production in a given period. Total product increases at different rates if more and more factors are employed. At the outset, it is more likely to increase at an increasing rate and then it increases at a diminishing rate. At the worst case, it may fall.
Question 14.
Define ‘Law of Variable Proportions’.
Answer:
According to G J. Stigler, “As equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point, the resulting increments of product will decrease, i.e. marginal product will diminish.”
Question 15.
What do you mean by fixed factors ?
Answer:
Fixed factors are those factors which remain unchanged during the short-run irrespective of the level of output. In other words, fixed factors in the short run undergo no change in order to change the volume of output. It is almost fixed during short-run.
Question 16.
What do you mean by Variable factors ?
Answer:
Variable factors are those factors which undergo a change with the change in the level of output. This is called variable factors in the sense that these factors are to be changed in order to change the level of output during short-run.
II. Answer within Five/Six sentence :
(A) WRITE SHORT NOTES ON :
Question 1.
Production Function:
Answer:
Production function refers to the technological relationship between physical inputs & physical output. It tells a functional relationship between the in puts & output. Thus, it is the relationship between the two variables i.e. inputs & output. It shows that the quantity of output produced depends on the quantity of inputs. Mathmatically stated.
Q = f (a, b, c, d) where Q refers to the output & a, b, c, d are the inputs. T stands for the functional relationship that exists between the two. Simply speaking, the production function describes maximum quantity of output that can be produced with given inputs.
Question 2.
Fixed Factor:
Answer:
During the short-run, the factors of production can be classified into fixed factor & variable factor. Fixed factors are those factor which remain fixed in the short-run. The quantum of these factors remain constant irrespective of the level of output. The example of fixed factors is building, machinary, land etc. which can not be changed in the short-run. Thus, the production in the short-run is carried on with fixed quantity of such factors & variable factor.
Question 3.
Variable Factor:
Answer:
Variable factors are those factors which change with the change in the level of output in the short-run. In the short-run, any increase or decrease in the level of output happens due to the change in variable factors alone. Raw materials, labour etc. are the examples of variable factor. In short-run production function, there observed direct relationship between these variable factors & the level of output.
Question 4.
Relationship between Average Product & marginal product.
Answer:
Average product refers to the output produced per unit of variable product. It can be assessed by dividing amount of variable factor with the total product. On the other hand, marginal product is the addition made to the total product due to the increase in one additional unit of factor. At the intial stage both the marginal & average product increase with the increase amount of variable factor but the change in marginal product is more quicker than the change in average product. As long as marginal product exceeds average product, the average product continues to rise. When marginal product falls short of the average product the average product starts falling. Marginal product becomes equal to average product at the maximum point of the average product.
Question 5.
Marginal Product’:
Answer:
Marginal product is the addition made to the total product caused by an increase in one additional unit of a factor employed. It is the rate of change of total product per unit change in factor. Marginal product at the initial stage of production continues to rise & after a point it starts declining. Marginal product may be positive, zero or negative. In the stage of increasing returns, it becomes positive, in the stage of diminishing return, it is zero & in the stage of negative return it becomes negative.
Question 6.
Why is the law of diminishing returns called the law of increasing costs ?
Answer:
The law of diminishing returns operates when the total output increases less than proportionately as more and more of variable factors are combined with fixed factors. In other words after the optimum level of production the marginal returns go on falling progressively. The average cost of production, therefore, increases when output does not increase in equal proportion to increase in inputs. Hence, the law of diminishing returns amounts to increasing cost and the law is otherwise known as the law of increasing costs.
Question 7.
Describe the concepts of total product, marginal product & average product.
Answer:
Total production refers to the total amount of goods and services produced with the help of factors of production during a given time period. Marginal production refers to change in total production as a result of the employment of one more unit of variable factors. It can be calculated as MPn = TPn – TPn-1, where n refers to the unit. Lastly average production indicates the total production per unit of the variable factor and it is calculated as AP = TP/q where units of variable factor.
Question 8.
Why does the law of variable proportions operate ?
Answer:
This law operates with several assumptions like homogeneous factors, constant technology, variability of factor proportion and short – run time period. This law operates on account of two reasons as Joan Robinson suggests. Firstly, there is a limit to the extent to which one factor can be substituted for other and secondly, two factors are not perfect substitutes.
(B) DISTINGUISH BETWEEN
Question 9.
Short period & Long period.
Answer:
Short period refers to a situation where the time involved is nor too short as in market period nor too long as. in long period. During short period supply cannot fully adjust to change in demand, because the fixed factors like plant and machinery cannot be changed at short notice. Hence, plant size remains unaltered. Production can be increased or decreased to some extent by changing the variable factors only. Demand forces play an important role in determining price in the short period. Firms may reap supernormal profits in the short period.
During long period, supply can fully adjust to demand conditions as all factors are variable during this period. Sufficient time is available to change the plant size by changing the factor inputs. New firms may enter the industry or old firms may quit depending upon the demand conditions. Thus, adjustment between supply and demand becomes possible. Firms earn only normal profits in the long period.
Question 10.
Average product & marginal product.
Answer:
Average product refers to the output produced per unit of variable product. It can be assessed by dividing amount of variable factor with the total product. On the other hand, marginal product is the addition made to the total product due to the increase in one additional unit of factor. At the initial stage both the marginal & average product increase with the increase amount of variable factor but the change in marginal product is more quicker than the change in average product. As long as marginal product exceeds average product, the average product continues to rise. When Marginal Product falls short of the average product the average product starts falling. Marginal product becomes equal to average product at the maximum point of the average product.
Question 11.
Distinguish between TP and MP.
Anwser:
- Total Product is the total amount of output produced during a given time period whereas marginal product (MP) refers to the addition made to the TP caused by an increase in one more unit of variable factor.
- When MP increases, TP increases at an increasing rate.
- When MP diminishes, TP increases at a diminishing rate.
- When MP is zero, TP becomes maximum.
- When MP is -negative, TP starts falling.
Group – B
Long Type Questions With Answers
Question 1.
What is production function ? Make a brief analysis of it.
Answer:
Production is an economic activity that creates new goods having exchange – value. Thus, it is the creation of utility. Production takes place with the combination of four factors of production, ie., land, labour, capital & organisation which can be broadly classified into fixed factor & variable factors. The combination of these factor produces output. In production, there occurs physical transformation of inputs into output. Hence, there exists a relationship between physical inputs & output which is called “ Production function”.
The production function refers to the technological relationship between physical inputs & physical output. It expresses the functional relationship between the two. The relationship between those inputs & outputs is presented in mathematical form which is the production function.” Symbolically .
Q = f (a, b, c, d)
Where Q → quantity of output
a, b, c, d → various inputs
f → function of
The above noted mathematical expression tells about production function. The word function refers to the relationship that exists between one dependent variable (output) & many independent variables (inputs). The production function shows the relationship between the maximum quantity of output produced in the productive process & the quantites of inputs used in that process.
Oh the physical aspects of production inside a firm & state of technology or method of organisation, the production function is quite external to economies. There may be many process of production & for each.of them there is a relationship between various combinations of inputs & the output. So a particular process is adopted & accepted which is well-suited to the enterpreneur. The combination perferred is determined on the basis of market prices of inputs used.
Production function bears an important implication. It expresses the relationship between quantity of output & the requirements & inputs for production. In otherwords, production function relates the various quantities of inputs with the maximum possible output which can be obtained out of the inputs, even the producer is interested in minimising the output from a given combination of inputs. Hence, the production function is considered to be a statement of technical facts which the producer uses to obtairie the least-cost combination of inputs required to produce a given quantity of output.
The form of production function can be determined by the state of technology. It represents the technical choice operate to each producer within a given span of time. A short-period production function differs from long period production function. When technical progRESS takes place, new production function comes into existence.
Production function for all firms may not be uniform. It differs from firm to firm & industry ‘ to industry. There are two types of inputs output relations in production function. First, the relations where quantities of some inputs are fixed while quantities of other inputs vary, secondly, where all the inputs are variable. The first type of production function is termed as short-run production function which is subject to “Law of Variable Proportion” & second one is subject to “Law of Returns to scale” which happens a long-run.
Production function is an essential device in the theory of production, technique of production & objectives & intention of the producer.
Question 2.
Explain the law of variable proportions.
Answer:
Production refers to the creation of goods & services having value in exchange. It takes place with the help of four factors of production like land, labour, capital & organisation which are broadly classified into two types of factors like fixed factor and variable factor. These factors are otherwise known as inputs. Thus, production is viewed as physical transformation of physical inputs into output. The quantum of output depends on the quantity of inputs used. So there observed certain relation between these inputs & output. The technological relationship between physical inputs & output is termed as production function. It expresses the functional relationship between these inputs & output.
This production function describes the maximum quantity of output that can be produced with given inputs. This production function may be short-run production function & long-jun production function. In the short-run, there are some factors kept fixed & at least one factor variable. But in the long run all the factors are variable & output can be increased by changing all the factors. The short-run production function explains that production process in which at least one factor should be variabale & other factors should be fixed. So when one variable factor is added or changed to combine with fixed factor, there occured a change in factor proportions. As the output is increased by changing the factor proportions, the law is so named as “Law of Variable Proportions.” This short-run production function is’ subject to the law of variable proportions.
Law of variable proportions occupies an important place in economics beacuse of its universal implications. This law is also known as “Law of Proportionality”. According to this law, if at least one factor in the combination of factors is varied, keeping other factors constant, beyond a certain point, the marginal product emerging out of this will diminish. This law has’ been variously difined by different economists.
According to GJ. Stigler, “As an equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point, the resulting increments of the product will diminish i.e. marginal product will diminish.” According to Prof. Benham, “As the proportion of the factor in a combination of factors is increased after a point, first the marginal & then the average product of that factor will diminish.”
From these definitions, it is clear that the increase in variable factor in the combinatin of factors leads to increase in output in different phases. It reveals that the marginal product as well as average product at the initial stage of production starts increasing & after a while both diminish. This law passes through three distinct phases.
Assumptions :,The law of variable proportion is based on following assumptions.
- (1) State of technology should memain unchanged. It means there should not be any change in technique of production.
- There should be two types of factors like fixed factors & variable factors in the shout-run.
- There should be the possibility of change in factor proportions. It means the factors can be combined in varied proportions.
- The factors employed in the productive process assumed to be homogeneous.
Explanation : The law of variable proportions possessed three distinct stages in which different
nature and behaviour of total product, average product & marginal product is observed. Total product is the aggregate of output produced at a given level of employment of variable factor. Average product denotes the output produced perunit of variable factor. Marginal product is the addition made to the total product caused by an employment of one additional unit of factor. All these products are studied in three stages of law of variable proportions.
Numerical Analysis:
The numerical example illustrates that the marginal product (MP) increases upto the employment of four units of variable factor. The average product also increases till this point. Total product at this point.increases at an increasing rate upto 3rd unit of variable factor & then increases at a diminishing rate. This is the first stage. From the employment of 5th unit of variable factor, the marginal product diminishes & it continues till 8th unit of variable factor. Total product at this stage increases at a diminishing rate. Average product also diminishes. After 8th unit of variable factor employed, marginal product becomes negative. Total product diminishes & average product also diminish. This is the third stage.
Graphical illustration : This notion can also be graphically illustrated as follows.
In the above figure, OX-axis measures quantity, of Variable factor & OY-axis measures the total product, (TP), marginal product (MP) & average product (AP). The figure shows three distinct stages.
Stage -1 : At the initial stage of production when the quantity of variable factor is gradually increased by keeping fixed factors constant, the TP increases at an increasing rate upto the point F, the point of inflexion & then increase at a diminishing rate up to point R. In this stage ON amount of variable factors are employed. Besides, marginal product first increases & then diminishes. The average product increases through out the stage. This first stage is commonly known as “stage of increasing returns which ends when marginal product cuts average product curve at its maximum point or when average product is maximum.
Stage – II: Stage II starts after the point of intersections of marginal product curve with average product curve. In this stage, total product increases at a diminishing rate and attains its maximum points. Mariginal product diminishes & becomes zero at point M . Average product also diminishes. In figure, with the employment of OM units of variable factor, total product becomes maximum & marginal product becomes zero. This stage is known as stage of diminishing returns & it comes to an end when total product is maximum or marginal product is zero.
Stage – III: After marginal product is being zero, further employment of variable factor leads to the emergence of third stage. In this stage, total product starts declining & Marginal product becomes negative. Hence, the variable factors becomes abundant in relation to fixed factor resulting negative marginal product of the variable factor.
Stage of Operation : Now, it is to adjudge which stage is suitable to carry on production. It is quite obvious that both the first & third stage are symmetrical. In the first stage, fixed factor is abundant in relation to variable factor for which fixed factors are not fully utilised. So the total product falls shoft of its maximum point. On the contrary in the third stage total product diminishes & marginal product is negative. So it is quite natural & irrational to opt for producing output in these two stages. As such, second stage i.e. stage of diminishing returns is the suitable stage for production. In this stage, both the factors are properly & effectively utilised & total product becomes maximum. So the rational producer prefers to produce in this stage.
Law of variable proportions gains wide appreciation because of its tremendous implications in the theory of production.
Question 3.
Illustrate the Law of Diminishing Returns. Is this law applicable to only agriculture ?
Answer:
Law of diminishing Returns is a unique law in the theory of production which has wide range of implications & applications. This law is prominently pronounced in the law of variable of proportions which is the generalised version of it. Though, this law becomes a part of the law of the variable proportions, yet it is admittedly conceived as the crucial part of it as it is the a suitable stage of production. Alfred Marshall, the chief architect of this law considers three law of returns corresponding to input-output relationship & thus concludes that diminishing returns quite visible in and applicable to agriculture.
According to Marshall, “An increase in the capital & labour applied in the cultivation of land causes in general a less than proportionate increase in the amount of product raised unless it happens to coincide with an improvement in the art of the agriculture.” In other words, it is observed that in the cultivation of land, if the quantity of land is fixed & the quantity of variable factors like labour & capital is gradually increased, the total production changes less than proportionately. In other way, it can also be read that if the quantity of variable factor is increased & combined with the fixed factor after a point, the resulting total product will diminish.
Assumptions : The law of diminishing returns operates on the basis of following assumptions.
- The art of agriculture should remain unchanged. In generalised form, T is presented “Lai the technique of production should remain constant.
- The variable factor must be homogenous.
- There should be the possibility of change in factor proportions.
Explanation : This law can be explained by the way of numerical & graphical analysis. Marshall presumed land as a fixed factor which is combined with labour & capital, the variable factors. If the number of doses of labour & capital is increased & combined with fixed factor, land the marginal products go on diminishing i.e. total product increases at a diminishing rate.
Numerical Analysis
| Unit of land (Fixed Factor) | Units of labour & Capital (variable Factor) | Total Product (TP) | Average Product (MP) | Marginal Product (AP) |
| 1 acre | 1 | 10 | 10 | 10 |
| 1 acre | 2 | 18 | 8 | 9 |
| 1 acre | 3 | 24 | 6 | 8 |
| 1 acre | 4 | 28 | 4 | 7 |
| 1 acre | 5 | 30 | 2 | 6 |
In the above analysis, it is revealed that with the gradual increase in the doses of labours & capital (1 unit to 5th unit) which is combined with fixed quantity of fixed factor, land (one acre), the marginal product diminishes & total product increases at a diminishing rate. Though this phenomenon does not happen immediately i.e. at the initial phase of production, yet it is the ultimate stage of operation in the productive process. In the analysis, the doses of labour & capital are increased from 1 to 5 units which results a decline in the marginal product from 10 units to 2 units. Total product increases from 10 units to 30 units.
Graphical Analysis : The same explanation can be graphically presented which is as follows :
In the above figure, doses of labours capital (in units) measured on OX-axis & marginal product on OY-axis. It is seen that with the increase in the doses of labour & capital, the marginal products of these factors goes on declinirig. Thus, the same conclusion as in numerical analysis is drawn in this graphical analysis.
Limitations : This law suffers from, certain limitations which are described below.
- The law will not operate if the technique or art of production changes.
- If the cultivation is undertaken for the first time, there may be increasing returns
- The law is not applicable if the factors are perfectly divisible.
- The law will not apply, if the labour & capital are inadequate.
Application of law : Primarily it is believed that the law is applicable to agriculture alone. Trough it is true that the application of this law is more prominently applied to agriculture, yet this law has wide application. This law is universally applied to agriculture, mining, fisheries, manufacturing industries, building etc.
Group – C
Objective type Questions with Answers
I. Multiple Choice Questions with Answers :
Question 1.
Production refers to
(i) creation of material wealth
(ii) creation of utility
(iii) creation of value
(iv) All of the above
Answer:
(ii) creation of utility
Question 2.
Goods which are used in productive process are termed as
(i) inputs
(ii) output
(iii) raw material
(iv) product
Answer:
(i) inputs
Question 3.
The input-out relationship shown in a functional manner is called
(i) input function
(ii) cost function
(iii) production function
(iv) All of the above
Answer:
(iii) production function
Question 4.
The factors which remain unchanged with the change in the level of output are called
(i) variable factors
(ii) fixed factors
(iii) None of the above
Answer:
(ii) fixed factors
Question 5.
Law of variable proportions operates during
(i) short-period
(ii) long period
(iii) market period
(iv) secular period
Answer:
(i) short-period
Question 6.
In law of variable proportions, the first stage is called
(i) stage of diminishing cost
(ii) stage of dminishing returns
(iii) stage in increasing cost
(iv) stage of negative returns
Answer:
(i) stage of diminishing cost
Question 7.
In which stage of law of variable proportions, the fixed factors are found to be abundant in relation to variable factors
(i) stage of increasing returns
(ii) stage of diminishing returns
(iii) stage of negative returns
(iv) all of the above
Answer:
(i) stage of increasing returns
Question 8.
The law of variable proportions is so named because
(i) Fixed factors changes in varied proportions
(ii) The ratio of fixed factor to variable factors change
(iii) The proportion of variable factors change
(iv) All of the above
Answer:
(ii) The ratio of fixed factor to variable factors change
Question 9.
In stage of increasing returns
(i) AP increases through out the stage.
(ii) TP increases at an increasing rate throughout the stage
(iii) MP increases through out the stage
(iv) All of the above
Answer:
(i) AP increases through out the stage.
Question 10.
The stage of increasing returns comes to an end
(i) when TP becomes maximum
(ii) when MP becomes maximum
(iii) when AP becomes maximum
(iv) None of the above
Answer:
(i) when TP becomes maximum
Question 11.
In stage of increasing returns
(i) MP curve cuts AP curve from below
(ii) AP curve cuts MP curve from above
(iii) MP curve cuts AP curve from above
(iv) MP curve cuts AP curve at its minimum point
Answer:
(iii) MP curve cuts AP curve from above
Question 12.
In the stage of increasing returns, the TP increases
(i) at an increasing rate
(ii) at a diminishing rate
(iii) at a cOnstant rate
(iv) initially at increasing rate & then at a diminishing rate
Answer:
(iv) initially at increasing rate & then at a diminishing rate
Question 13.
When MP goes on increasing
(i) TP increases at a diminishing raie
(ii) IP increases al an increasing rate.
(iii) TP increases at a constant rate
(iv) TP remains constant
Answer:
(ii) TP increases at an increasing raie.
Question 14.
As long as MP > AP, AP is
(i) increasing
(ii) diminishing
(iii) constant
(iv) Both increasing & diminishing
Answer:
(i) increasing
Question 15.
As long as MP > AP, AP is
(i) increasing
(ii) diminishing
(iii) Both increasing & diminishing
(iv) constant
Answer:
(ii) diminishing
Question 16.
TP becomes maximum during the stage of
(i) increasing returns
(ii) stage of diminishing returns
(iii) stage of negative return
(iv) None of the above
Answer:
(ii) stage of diminishing returns
Question 17.
When TP is maximum marginal product (MP) is
(i) positive
(ii) zero
(iii) negative
(iv) cannot say
Answer:
(ii) tCtO
Question 18.
TP starts falling when
(i) MP is -ve
(ii) AP is -ve
(iii) Mp is zero
(iv) APiszcro
Answer:
(i) MP is -ve
Question 19.
Which stage is the rational stage for production?
(i) stage of increasing returns
(ii) stage of diminishing returns
(iii) stage of negative returns
(iv) Both stage of increasing & diminishing returns
Answer:
(ii) stage of diminishing returns
Question 20.
Rate of change of total product is called
(i) Average product
(ii) marginal product
(iii) Both marginal & average product
(iv) None of the above
Answer:
(ii) marginal product
Question 21.
Which is the assumption for the law of variable proportions?
(i) All the factors arc homogeneous
(ii) There must be fixed & variable factors
(iii) Fixed factors should be perfectly divisible
(iv) All of the above
Answer:
(iv) All of the above
Question 22.
For which reason, the law of variable proportions operate ?
(i) indivisibility of fixed factor
(ii). indivisibility of variable factor
(iii) factors are perfect substitute for each other
(iv) All of the above
Answer:
(i) indivisibility of fixed factor
Question 23.
Law of variable proportions does not occur if
(i) factors are perfect divisible
(ii) factors are imperfect substitute
(iii) factors are homogeneous
(iv) All of the above
Answer:
(i) factors are perfect divisible
Question 24.
Which is the factor of production?
(i) Land
(ii) Labour
(iii) Capital
(iv) All of the above
Answer:
(iv) All of the above
Question 25.
A black market is not a producer because
(i) it does not earn income
(ii) it is an unethical practice
(iii) money is not involved
(iv) it does not create any value
Answer:
(iv) it does not create any value
Question 26.
Mines & fisheries are subject to the law of
(i) diminishing retursn
(ii) increasing returns
(iii) negative returns
(iv) constant returns
Answer:
(i) diminishing retursn
Question 27.
If on a piece of land, more & more labour & capital is employed after certain point, the output increases
(i) more than proportionately
(ii) less than proportionately
(iii) at constant rate
(iv) None of the above
Answer:
(ii) less than proportionately
Question 28.
If MP decreases & total product increases in this situation shows the stage of
(i) increasing returns
(ii) diminishing returns
(iii) negative returns
(iv) constant returns
Answer:
(ii) diminishing returns
Question 29.
In law of diminishing returns, returns to a variable factor
(i) increases
(ii) diminishes
(iii) remains constant
(iv) None of the above
Answer:
(ii) diminishes
Question 30.
If an acre of land is cultivated more intensively, the output
(i) increases more that proportionately
(ii) increases less than proportionately
(iii) decreases less than proportionately
(iv) increases proportionately.
Answer:
(ii) increases less than proportionately
Question 31.
The rate at which the total product changes is called
(i) average product
(ii) marginal product
(iii) Both (i) and (ii)
(iv) None of the above
Answer:
(ii) marginal product
II. Fill in the blanks :
Question 1.
_____ is the creation of utility.
Answer:
Production
Question 2.
_____ can be resumed with land, labour, capital and organisation.
Answer:
Production
Question 3.
Law of variable proportion is a law for _____
Answer:
short-run production.
Question 4.
According to Law of Variable Proportion, all the factors are _____
Answer:
Variable
Question 5.
Fixed factors, in the _____, remain unchanged/fixed irrespective of the level of output.
Answer:
short-run
Question 6.
Total product _____ at a diminishing rate in the stage of diminishing returns.
Answer:
increases
Question 7.
Stage of _____ is the suitable stage of production.
Answer:
diminishing returns
Question 8.
The marginal product becomes _____ in the second stage.
Answer:
zero
Question 9.
Total Product is maximum when Marginal Product is _____
Answer:
zero
Question 10.
Total Product _____ during the stage of negative returns.
Answer:
falls
Question 11.
_____ product can be zero or negative but not average product.
Answer:
Marginal
Question 12.
The law of _____ returns is more applicable to agriculture.
Answer:
diminishing
Question 13.
The law of variable proportion is a _____ period phenomenon.
Answer:
short-run
Question 14.
The law of diminishing returns is otherwise known as law of _____ cost.
Answer:
increasing
Question 15.
Mines and fisheries are subject to the law of _____ returns.
Answer:
diminishing
Question 16.
The stage of increasing returns operate due to the _____ of factors.
Answer:
indivisibility
Question 17.
Rate of change of total product is called _____
Answer:
Marginal Product
Question 18.
Total product becomes maximum in the stage of _____
Answer:
Diminishing return
Question 19.
The electricity is a _____ factor.
Answer:
variable
Question 20.
The manager employed in an enterprise is a _____ factor.
Answer:
Fixed
III. Correct the Sentences:
Question 1.
Production is the destruction of utility.
Answer:
Incorrect
Correct – Production is the creation of utility.
Question 2.
All the factors are variable in the short-run.
Answer:
Incorrect
Correct: All the factors are variable in the long-run.
Question 3.
Production function is the technical relationship between inputs & output.
Answer:
Correct
Question 4.
Law of variable proportions is applicable in long-run.
Answer:
Incorrect
Correct – Law of variable proportions is applicable in short-run.
Question 5.
Long-run production function is subject to law of variable proportions.
Answer:
Incorrect.
Correct – Short-run production function is subject to law of variable proportions.
Question 6.
In the long-run all the factors are variable.
Answer:
Correct
Question 7.
Machines are the examples of variable factor.
Answer:
Incorrect
Correct – Machines are the examples of fixed factor.
Question 8.
In the short-run, level of output can be increased due to change in fixed factor.
Answer:
Incorrect.
Correct – In the short-run, level of output can be increase due to change in variable factor
Question 9.
Total product becomes maximum in the stage of increasing returns.
Answer:
Incorrect.
Correct – Total product becomes maximum in the stage of diminishing returns.
Question 10.
In the second stage of law of variable proportions, the marginal product is zero.
Answer:
Correct.
Question 11.
In the first stage, the quantity of fixed factors is abundant in relation to variable factor.
Answer:
Correct.
Question 12.
Manager is a variable factor.
Answer:
Incorrect.
Correct – Manager is a fixed factor.
Question 13.
In the short-run, all the inputs can be varied.
Answer:
Incorrect.
Correct – In the long-run, all the inputs can be varied.
Question 14.
Stage of increasing returns & stage of diminishing returns are symmetrical.
Answer:
Incorrect.
Correct – Stage of increasing returns & stage of – ve retuns are symmetrical.
Question 15.
Producers produce in the stage of increasing returns.
Answer:
Incorrect.
Correct – Producer produce in the stage of diminishing returns.
Question 16.
When marginal product is zero, total product is maximum.
Answer:
Incorrect
Correct: When marginal product is zero, total product is maximum.
Question 17.
Marginal Product is maximum in the second stage of law of variable proportions.
Answer:
Incorrect
Correct: Marginal product is maximum in the first stage of law of variable proportions.
Question 18.
When marginal product is – ve. total product is negative.
Answer:
Incorrect
Correct: When marginal product is – ve. total product declines.
Question 19.
Marginal product is the sum of total product.
Answer:
Incorrect
Correct: Total product is the sum of marginal products
Question 20.
Law of diminishing returns is applied to agriculture alone.
Answer:
Incorrect
Correct: Law of diminishing returns is applied to all fields.
Question 21.
Marginal product can never be negative.
Answer:
Incorrect
Correct – Total product can never be negative.
IV. Answer the following questions in one word :
A. ANSWER IN ONE SENTENCE
Question 1.
What is Production ?
Answer:
Production is the creation of goods & services having exchange value, or, Production is the creation of utility.
Question 2.
What do you mean by inputs ?
Answer:
Inputs are those goods & services which are used for further poroduction.
Question 3.
What is fixed factor ?
Answer:
Fixed factor is that factor which remains unchanged irrespective of the level of output.
Question 4.
What is variable factor ?
Answer:
Variable factor is that factor which changes with the change in the level of output.
Question 5.
Give an example of variable factor.
Answer:
Raw material.
Question 6.
What is production function ?
Answer:
Production function refers to the technological relationship between physical inputs & output.
Question 7.
What is short-run ?
Answer:
Short-run or short-period is a short – span of time during which there observed some fixed factor & some variable factors.
Question 8.
What is short-run production function ?
Answer:
Short-run production function is that type of production function in which output is produced with the combination of fixed factors & variable factors.
Question 9.
What is total product ?
Answer:
Total product is aggregate of output produced with a given quantity of inputs.
Question 10.
What is average product ?
Answer:
Average product is the output produced per unit of variable factor.
Question 11.
What is marginal product ?
Answer:
Marginal product refers to the addition made to the total product caused by an increase in one additional unit of factor employed.
Question 12.
How is total product derived from marginal product ?
Answer:
Total product is sum of marginal products.
Question 13.
What happens to total product if marginal product falls ?
Answer:
Total product increases at a diminishing rate when marginal product falls.
Question 14.
What will be the total product if marginal product becomes zero ?
Answer:
Total product is maximum when marginal product is zero.
Question 15.
What happens to total product if marginal product is negative ?
Answer:
Total product diminishes when marginal product is negative.
Question 16.
What is shape of marginal product curve ?
Answer:
Marginal product curve is inverse U- shaped.
Question 17.
During which stage, total product becomes maximum.
Answer:
During the stage of diminishing returns, total product becomes maximum.
Question 18.
At which stage, the producer produces goods ?
Answer:
In the stage of diminishing returns (stage II) the producer produces goods.
Question 19.
What happens to marginal product in the stage of negative returns ?
Answer:
Marginal product becomes negative in the stage of negative returns.
Question 20.
At what point marginal product is to equal average product ?
Answer:
Marginal product is equal to average product at the maximum point of average product curve.
Question 21.
In which stage, total product declines ?
Answer:
In the stage of negative returns, the total product declines.