Theory of Production function
- Land includes the following natural resources.
a. On the surface (i.e., soil, agricultural land)
b. Below the surface (i.e., mineral resources, rocks, groundwater, etc.)
c. Above the surface (i.e., climate, rain space monitoring, etc.)
d. All the above.
Ans: (d) All the above.
2. The peculiarity of labor is that it has got a backward sloping
a. Supply curve
b. Demand curve
c. Engel curve
d. Consumption curve
Ans: (a) Supply curve
3. The peculiarly of labor, which separates it from other factors of production is that
a. Its supply is limited
b. labor is inseparable from the laborer
c. Its demand is fixed
d. All of these
Ans: (d) All of these
4. Which of the following cannot be termed as ‘capital’?
a. Wheat stored for seed
b. Money hoarded in lockers
c. Money invested in unit trust
d. Truck used for carrying raw materials to the factory
Ans: (b) Money hoarded in lockers
5. The real aim of production is
a. To create material goods
b. To eliminate poverty.
c. To satisfy people’s wants
d. To provide basic necessities
Ans. (c) To satisfy people wants
6. In economics, the term ‘production’ implies
a. Manufacture of a product
b. Creation of utility
c. Growing a crop
d. Providing a service
Ans. (b) Creation of utility
7. Divisions of labor require the division of a production process into a series of distinct operations
a. Each of which is linked ‘each of which it is performed by different workers
b. Each of which is essentially similar, each of which requires little skill.
c. None of which is linked, but all of which required the use of machinery
d. None of which is linked, but all of which require skilled labor.
Ans: (a) Each of which is linked ‘each of which it is performed by different workers
8. Capital’ means to the economist those produced instruments of production the use of which
a. Produces further wealth
b. Result in profits
c. Creates employment
d. Requires skill
Ans: (a) produces further wealth
9. The basic principle underlying location is the tendency for the production of the commodity to be located on the basis of
a. Division of labor
b. Employment trends
c. Relatives costs and benefits
d. Immobility of skilled labor
Ans: (c) Relatives costs and benefits
10. By “Labour the economist means
a. All the work which provides necessities
b. All the work performed by those not classified as “unemployable’
c. The human effect employed in the production
d. The human effect employed in production capital
Ans. (c) The human effect employed in the production
11. Which of the following would be classified by the economist as “capital”?
I. Lathe in an engineering factory
II. A lorry used for carrying finished goods
III. A new timber plantation
IV. Colin the steam
a. I only
b. I, II
c. I, II, III
d. I, II, III, IV
Ans: b. I, II
12. Which of the following have an important influence on the elasticity of demand for factors?
I. The extent of localization of industries.
II. The number of Factors required in a particular type of production
III. Substitutability between Factors
IV. Mobility of finance capital.
a. I only
b. II ,III
c. I, II, III
d. I,II,III, IV
Ans. (b) II, III
13. Find out the best reason
The difference in wages is due to
a. Mobility of labor
b. Difference in demand condition
c. Customs and Traditions in fixing the level of remuneration
d. The marginal productivity of labor
Ans: (b) The difference in demand condition
14. A production function of the form Q(K, L)=AKα Lβ Where k is capital, L is labor, A constant,α,β are parameters
a. C.E.S production function
b. Translog production function
c. Input-output production Function
d. Cobb- Douglas production function
Ans: (d) Cobb- Douglas production function
15. Production function relates
a. Prides to demands
b. Demand to supply
c. Cost to supply
d. Input to Output
d. Input to Output
Ans: (d) Input to Output
16. The major difference between a short-run and long-run production analysis lies in the no. of
a. Variables input
b. products
consumers
d. Markets
Ans: (a) Variables input
17. A technical progress in the production function tends to
a. Shift the iso-quant upwards
b. Shift the isoquant downwards
c. Keep the iso-quant as it is
d. Either (a) or (b)
Ans: (a) Shift the iso-quant upwards
18. Fixes inputs are the factors of production that
a. Are determined by firms plants size
b. Can be increased or decreased quickly as output changes
c. Can not be increased or decreased as an output change
d. None of the above
Ans: (c) Can not be increased or decreased as an output change
19. The production function of a firm will change whenever
a. Input pride changes
b. The firm employs more or any input
c. the firm increased its level output.
d. The relevant technology changes
Ans: (d) The relevant technology changes
20. On the expansion path, the firm operating with a homogeneous production function, which among the following remain constant?
1. Input ratio
2. Price ratio of inputs
3. Marginal rate of technical substitution between the factors
4. Elasticity of substitution
Select the correct answer using the codes given below :
a.1 and 2
b. 1 and 4
c. 2, 3, and 4
d. 1,2,3 and 4
Ans: (d) 1,2,3 and 4
21. Under the law of variable proportions, the average and the marginal product of the variable factor would ultimately
a. Become equal
b. Decrease
c. Become constant
d. Increase
Ans: (b) Decrease
22. Returns to scale is a
a. Short-run phenomenon
b. long -term phenomenon
c. Timeless phenomenon
d. Direction less phenomenon
Ans: (b) long-term phenomenon
23. Diminishing returns occur when a firm
a. Use more of one input while holding all other inputs constant
b. Use too much of all inputs
c. Does not utilize its input properly
d. Reduce the use of all inputs simultaneously
Ans: (a) Use more of one input while holding all other inputs constant
24. A characteristic of a production function where the marginal product of factor falls as the amount of the factor increase where all other factors are held constant
a. Diminishing marginal product
b. increases marginal product
c. Constant marginal product
d. None of the above
Ans: (a) Diminishing marginal product
25. The amount of revenue remaining for the owners of a firm after all factors of production have been compensated
a. Normal profit
b. Supernormal profit
c. Surplus profits
d. Economics profits
Ans: (a) Normal profit
26. The law of diminishing returns according to the modern perception is
a. Applicable to agriculture
b. Applicable to industry
c. Applicable to service
d. Applicable to all fields of production
Ans: (d) Applicable to all fields of production
27. The law of variable proportion comes into being when
a. All factors are fixed
b. All factors are variables
c. There are some fixed factors and a variables factor
d. there are only two variables factors
Ans: (c) There are some fixed factors and a variables factor
28. The law diminishing returns
a. Is an economic law of great importance
b. Does not concern the entrepreneur in deciding how to combine his factors of production
c. Merely expresses the technical relationship between output and different amounts of factors employed
d. Shows how output varies as factors are combined in different proportions
Ans: (d) Shows how output varies as factors are combined in different proportions
29. Exhaustible natural and mineral resources is an important reason for
a. Increase returns to scale
b. Constant returns to scale
c. Decrease returns to scale
d. law of variable proportional
Ans: (c) Decrease returns to scale
30. Under the law of variable proportions the stage in which MP is negative and TP is declining relates to
a. I Stage of production
b. II Stage of production
c. III Stage of production.
d. None of the above
Ans: (c) III Stage of production
31. “AP is at maximum at the beginning of this stage and MP is zero at the end of this stage “
This stage relates to
a. I stage of production
b. II stage of production
c. III stage of production
d. All the above
Ans: (II) stage of production
32. Which of the stage is relevant for a firm that aims at the maximum output in the short run
a. Stage I
b. Stage II
c. Stage III
d. Beyond Stage III
Ans. (b) Stage II
33. Which of the following conditions is (are) regarded as necessary before the law of diminishing returns to a factor can be said to operate
1. Other factors are held constant
2. The stage of technical knowledge does not change
3. All units of the variable factor are homogeneous
a. 1,2,3 are correct
b. 1,2 only are correct
c. 2,3 only are correct
d. 1 only is correct
Ans : (a) 1,2,3 are correct
34. Why do increasing returns occur in the initial stage of production?
a. Indivisibility of fixed factor
b. Increased in the specialization of the variable factor.
c. Indivisibility of fixed factor and the specialization of the variable factor.
d. Technical progress
Ans: (c) Indivisibility of fixed factor and the specialization of the variable factor.
35. The difference between returns of factors and returns o scale is
a. Size of inputs
b. Size of outputs
c. Variable of inputs in the production function
d. all the above
Ans: (c) Variable of inputs in the production function
36. Increasing returns to scale can be explained in terms of
a. Optimum factor proportion
b. Internal economies of scale
c. fixed scale of plans
d. Marketing
Ans: (b) Internal economies of scale
37. Consider the following combination of inputs and outputs
| Labour | Capital | Output |
| 5 6 7 8 9 | 10 12 14 16 18 | 1 2 3 4 5 |
| 10 | 20 | 6 |
This production technology satisfies
a. Increasing returns to scale
b. Diminishing returns to scale
c. Constant returns to scale
d. Increasing returns initially, followed decreasing returns to scale
Ans. (c) Constant returns to scale
38. Diminishing marginal returns to factor arise essentially because
a. The quantity (or quantities) of some factor or factor) is (or are) relatively fixed
b. The quantity of that factor is fixed
c. Quantities of all factors are fixed
d. There is government control on production
Ans: (a) The quantity (or quantities) of some factor or factor) is (or are) relatively fixed
39. The law of diminishing returns operates due to
I. Scarcity of factor
II. Heterogeneous
III. Defective combination of a factor of production
IV. Factor of production being an imperfect substitute
Of the statement
a. I alone is correct
b. I and II are correct
c. I, II, and III are correct
d. All the correct
Ans: All the correct
40. Which of the following condition relating to the marginal revenue products of a factor tends to diminish as input of the factor increase?
a. Technical impact of diminishing marginal returns
b. Diminishing rate of substitutability of a factor
c. Diminishing marginal utility of factor
d. Tendency of the marginal utility of factor
select the correct answer using the codes given below
a. 1 and 2
b. 1 and 3
c. 2,3 and 4
d. 1,2,3 and 4
Ans: 2,3 and 4