Deck 2: Production and Demand Theories

Question 1

In short-run

A)all inputs are fixed
B)all inputs are variable
C)some inputs are fixed and some are variable
D)none of the above

Answer 1

some inputs are fixed and some are variable

Question 2

In long-run

A)all inputs are fixed
B)all inputs are variable
C)some inputs are fixed and some are variable
D)none of the above

Answer 2

all inputs are variable

Question 3

The variable cost of a firm vary in direct proportion to the

A)volume of its output
B)extent of its profits
C)volume of its sale
D)all of the above

Answer 3

volume of its output

Question 4

Law of variable proportions is concerned with

A)long-run production function
B)laws of returns to scale
C)short-run production function
D)none of the above

Question 5

The 'point of inflection' come in which stage of the law of variable proportions

A)stage i
B)stage ii
C)stage iii
D)none of the above

Question 6

A rational producer will select his level of production in which stage of the law of variable proportions

A)stage i
B)stage ii
C)stage iii
D)either stage i or stage ii

Question 7

Total product reaches at maximum when

A)mp is increasing
B)mp is maximum
C)mp = 0
D)mp is negative

Question 8

Returns to scale refers to the production function where

A)all factors are fixed
B)some factors are fixed and others are variable
C)all factors are variable
D)none of the above

Question 9

In the case of diminishing returns to scale, a given proportionate increase in all factors causes

A)a more than proportionate increase in output
B)an equal proportionate increase in output
C)a less than proportionate increase in output
D)none of the above

Question 10

Increasing returns to scale occurs due to

A)division of labour
B)specialization
C)economies of scale
D)all of the above

Question 11

The cause for diminishing returns to scale is:

A)improper proportion of factors of production
B)difficulty in the combination of certain factors
C)excess combination of certain factors
D)all of the above

Question 12

The solution to diminishing returns to scale is :

A)technical progress
B)expansion of resources
C)proper combination or resources
D)all of the above

Question 13

Which one of the following is not related to economies of scale:

A)scope for division of labour and specialization
B)scope for getting inputs at cheaper rates
C)difficulty faces by the managers to coordinate the business
D)scope for better storage facilities

Question 14

labourers are employed the firm produces 136 units of output. Then the marginal product is ---

A)120
B)136
C)6
D)16

Question 15

Other things remaining the same, the quantity of a product demanded increases with ------------ in price.

A)increase
B)decrease
C)variation
D)none of the above

Question 16

Relation between price of a commodity and demand for another commodity is measured by:

A)price elasticity
B)income elasticity
C)cross elasticity
D)elasticity of substitution

Question 17

When TU falls, MU is:

A)rises
B)zero
C)positive
D)negative

Question 18

Demand varies ------------- with price.

A)directly
B)positively
C)inversely
D)none of the above

Question 19

When Q = f (P), the elasticity coefficient is measured by:

A)?q/?p / p/q
B)?p/?q * q/p
C)?q/?p * p/q
D)?p/?q / q/p

Question 20

In the case of luxury goods, the income elasticity of demand will be:

A)less than unity
B)unity
C)more than unity
D)all the above

Question 21

Income elasticity is positive, but less than unity in the case of:

A)necessity
B)luxury
C)inferior
D)substitutes