case study on production function class 11

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Class 11 Economics Case Study Questions

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Economics is the most preferred subject of class 11 students who opt for the Commerce or Humanities stream. CBSE has introduced the format of class 11 Economics case study questions in the syllabus for the new academic session. It is a well-integrated program that highlights the general economic terms and their utility in our daily lives.

Economics class 11 plays a vital role in constructing and strengthening the foundation of major economic theories and concepts that are studied in depth at an advanced level in class 12 Economics. Class 11 Economics is not very easy but with practice and proper guidance, students can ace the subject. 

Case Study Questions in Class 11 Economics

CBSE introduced case-based questions in class 11 Economics question paper last year i.e-  2021 to uplift analytical reasoning in students. CBSE introduced a few changes in the Economics class 11 question paper so as to enhance and develop analytical and reasoning skills among students. The questions would be based on real-life situations encountered by the students.

The Purpose

The sole purpose of introducing case-based questions in the class 11 curriculum by CBSE was to drift from rote learning to competency and situation-based learning.

NEP 2020 and Case Studies

Sanyam Bhardwaj, controller of examinations, CBSE focussed on the fact that case-based questions would enhance the critical reasoning skills of the students. He highlighted the fact that adding such questions to the examination was a step towards achieving the goals of the National Education Policy (NEP) 2020.

Implementation in class 11

According to the new examination guidelines released by CBSE for the current academic year, case study-based questions would be asked in the class 11 Economics exam too. Initially, when CBSE introduced case-based questions, a panic situation was created among the teachers as well as students. The concept was new and unexplored.

Format of Case Studies in Economics

A comprehensive passage is provided in the question paper, on the basis of which the student is required to solve the given case-based question asked in the Economics class 11 exam. Initially, the case-based questions appeared to be puzzling and tricky for both the students and the teachers. Perhaps, they were not willing to experiment with the new pattern but now a lot more clarity is there that has made the question paper quite favorable for the students.

You can Score High

Economics is a subject of paramount importance for the students who have opted for the Commerce / Humanities stream in class 11. The subject is high scoring and facilitates the students to increase their percentile and excel in academics.

Economics syllabus of class 11 

The entire Economics Syllabus is divided into 2 parts:

• Part A, Statistics
• Part B,  Microeconomics

Syllabus Design

CBSE has designed the entire syllabus for Economics , grade 11 in such a way that it enables the students to analyze various economic issues and develop the ability to deal with them. The complete syllabus is categorized into 7 units, so as to facilitate the students as well as teachers to clearly visualize and comprehend all the listed topics in the NCERT textbooks for class 11 Economics.

NCERT Books

It is recommended to go through the textbooks rigorously. Two books have been published by NCERT. Economics is a vast subject and the class 11 syllabus cannot be taken lightly as it forms the base for the CBSE class 12 board exam too. Students need to follow and practice other reference books but  NCERT textbooks need to be read in-depth in order to excel in this commerce stream subject.

CBSE Class – 11 Economics (Code No. 030)

Theory: 80 Marks (3 Hours) Project: 20 Marks

Case Study Passage (Economics class 11)  

As part of these questions, the students would be provided with a hypothetical situation or text, based on which reasoning questions will have to be answered by them. It is a must for the students to read the passage carefully prior to attempting the questions. These questions can be based on each chapter in the NCERT textbooks for Economics class 11. Students must prepare well for the case-based questions before appearing for their Economics exam as these questions demand complete knowledge of the various concepts in their syllabus. CBSE plans to increase the weightage of such questions in the upcoming years.

Kind of case-based Questions in Economics

Economics is one of the fundamental subjects for commerce students that opens the various ways of achieving social welfare and getting maximum satisfaction with the limited resources available in the economy. The subject is demanding and definitely requires a greater effort from the students in order to strive for a perfect score. CBSE plans to increase the weightage of case-based questions in class 11 economics question papers that are prepared by the schools on the guidelines issued by CBSE itself. 

The case-based questions asked in the Economics question paper for class 11 can be formulated in 2 ways:

• Objective: these will be asked in the MCQ format
• Subjective: these would be answered briefly or might require some calculations /formula application.

As per the latest circular issued by CBSE on Assessment and Evaluation practices of the board for the session 2022-23, CBSE has clearly mentioned that competency-based questions including case studies will be different from subjective questions. 

Case-based  questions can be segregated in terms of their difficulty level too:

• Direct questions: such questions can be easily solved as their answers are there in the given passage itself.
• Indirect/ analytical questions: these questions demand complete and thorough knowledge of the concepts. Their solution is not visible in the passage, but it would be based on the theory that would be highlighted in the text provided in the question paper. The student is expected to read the passage carefully, analyze it and then solve it.

How To Prepare For Case-based Questions? 

Students need to prepare well for the case-based questions before appearing for their class 11 Economics exams. Here are some tips which will help the student to solve the case-based questions at ease:

• Read the provided text carefully
• Try to comprehend the situation and focus on the question asked
• Analyze and carefully answer the question asked
• Students may follow a reversal pattern, especially Microeconomics questions, i.e read the asked questions first and then look for the solutions in the given passage. The process will definitely save time.
• Do not neglect the theoretical concepts of Statistics, this is vital for achieving a perfect score.
• Practice extensively, especially for the numerical. This would help the student to memorize formulas. 
• Provide to the point responses
• Master all major concepts of your NCERT textbooks 

Students need to strengthen their fundamentals in order to ace the Economics class 11 CBSE  exam. Case studies can be easily solved if your key concepts are crystal clear. These simple points if kept in mind will definitely help the students to fetch good marks in case study questions in class 11 Economics. 

Case Study Question Examples in Economics

Here a re some given case study questions for CBSE class 11 Economics. If you wish to get more case study questions and other study material, download the myCBSEguide app now. You can also access it through our student dashboard.

Class 11 Economics Case Study 1

Read the following Case Study carefully and answer the questions on the basis of the same:

If our income rises, we generally tend to buy more of the goods. More income would mean more pens, more shirts, more shoes,  more cars and so on. But there are exceptions. If initially, you are buying coarse grain, how would you take your increase in income now? Perhaps, as a first step, you would discard the consumption of inferiors. Surely, this happens in the deserts of Rajasthan where the rich minority eats wheat while the poor majority eats Bajra as their staple food. 

• The law of demand does not apply to __________________ goods. (Normal/ Giffen)
• Inferior goods are those whose income effect is_____________. (Negative/ Positive)
• upward movement on the demand curve.
• downward movement on the demand curve
• rightward shift of the demand curve
• leftward shift of the demand curve
• becomes a horizontal straight line
• becomes a vertical straight line
• shifts to the right
• shifts to the left

Answer Key:

• Leftward shift of the demand curve
• Shifts to the left

 Class 11 Economics Case Study 2

Census of India is a decennial publication of the Government of India. It is published by Registrar General and Census Commissioner, Under Ministry of Home Affairs, Government of India. It is a very comprehensive source of secondary data. It relates to population size and various aspects of demographic changes in India. Under the Ministry of Home Affairs, Government of India. It may be of historical interest that though the population census of India is a major administrative function; the Census Organisation was set up on an ad-hoc basis for each Census till the 1951 Census. The Census Act was enacted in 1948 to provide for the scheme of conducting population census with duties and responsibilities of census officers. The Government of India decided in May 1949 to initiate steps for developing systematic collection of statistics on the size of the population, its growth, etc., and established an organisation in the Ministry of Home Affairs under Registrar General and ex-Officio Census Commissioner, India.

• Data originally collected in the process of investigation are known as ________ (Primary data/ Secondary data).
• The problem of double conclusion arises in ________ (indirect oral investigation/ direct personal interview).
• Post independence, the first census of India was conducted in ________ (1949/1951)
• Census of India is carried out once in ________ years. (10/ 5)
• Primary data
• Indirect oral investigation

Class 11 Economics Case Study 3

Read the following  Case Study carefully and answer the questions on the basis of the same: Unpublished data or literature is known as grey literature in research. (The term ‘grey literature’ also includes data published in a non-commercial form, such as a conference proceeding.) These data are collected by the government organisations and others, generally for their self-use or office record. Unpublished data is useful mainly in secondary research, such as literature reviews and systematic reviews. It provides pointers to new research and perhaps also research paths to avoid. Preprints are a growing form of unpublished data these days and have proved very useful in guiding research in critical areas such as COVID-19.  Published sources of secondary data are government publications, semi-government publications, publications of research institutions, international publications etc.

• ________ data are collected from published or unpublished reports. (Primary/ Secondary)
• In the case of a ________, answers are to be written by the enumerators specifically hired for the purpose. ( Questionnaire/ Schedule)
• ________ publish data relating to education, health, births and deaths. (Government publications/ Semi- Government Publications)
• 76th round of NSSO was on ________ (Persons with disabilities and drinking water/ density of population)
• Secondary Data
• Semi- Government Publications
• Persons with disabilities and drinking water

Advantages of case study questions in Economics

Class 11 Economics syllabus is divided into 2 books and CBSE can ask case study questions from any of them. Students are expected to prepare themselves thoroughly for both books. They ought to practice class 11 Economics case-based questions from the various options available to them, so as to excel in the subject.

• Enhance the analytical skills of students
• Provide a complete and detailed understanding of the concepts
• Inculcate intellectual capabilities in students
• Help students retain knowledge for a longer period of time
• The questions would help to discard the concept of rote learning
• Case studies promote and strengthen practical learning.

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Case Study Questions Class 11 Economics

Students should refer to the following Case Study Questions Class 11 Economics which have been provided below as per the latest syllabus and examination pattern issued by CBSE, NCERT, and KVS. As per the new examination guidelines issued for the current academic year, case study-based questions will be asked in the Grade 11 Economics exams. Students should understand the case studies provided below and then practice these questions and answers provided by our teachers.

Class 11 Economics Case Study Questions

Please click on the links below to access free solved Case Study Questions for Class 11 Economics. We have provided chapter-wise case studies with solved questions. Please carefully understand each case and related questions before attempting the questions. Our teachers have provided answers to all questions so that you can compare your answers.

We have also provided MCQ Question for Class 11 Economics which will be asked in the upcoming exams in Grade 11. As this year many questions will be MCQ-based and there will also be a few case studies in the question papers. Students should go through all chapter-wise Case Study Questions for Class 11 Economics. We have provided many other useful links and study material for Standard 11th Economics for the benefit of students. All content has been provided for free so that the students can take full benefit and get better marks in examinations. Incase any student faces any doubts, please provide your comments in the section below so that our faculty is able to respond to your questions.

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Production Function Class 11 Notes

Production refers to the transformation of inputs into output. Here are the notes of the chapter ‘Production Function’. Here are production function class 11 notes.

Topics Discussed

Production Function

The production function is an expression of the technological relation between physical inputs and output of a good.

Difference between Short Run and Long Run

Difference between Variable factors and Fixed factors

Types of Production Functions

Short run production function.

Short-run production function refers to a situation when output is increased by changing only one input while keeping other inputs unchanged.

Long Run Production Function

Long-run production function refers to a situation when output is increased by increasing all the inputs simultaneously and in the same proportion.

Concept of Product

Product refers to the volume of goods produced by a firm during a specified period.

• Total Product (TP): It refers to the total quantity of goods produced by a firm during a given period.
• Average Product (AP): It refers to the output per unit of variable inputs.
• Marginal Product (MP): It refers to the additional to total output where one more unit of variable factor is employed.

Elasticity of Demand Class 11 Notes

Law of Variable Proportion

The law of variable proportion states that as we increase the quantity of only one input keeping other inputs fixed, the total product(TP) initially increases at an increasing rate, then at a decreasing rate, and finally at a negative rate.

Assumptions of the Law of Variable Proportion

• LVP always operates in the short run.
• This law applies to the field of production only.
• The effect of change in output due to change in variable factors can be easily determined.

Phases of LVP

There are 3 phases of LVP:

1) Increasing Returns to Factor

In the first phase, every additional variable factor adds more and more to the total output, which means TP increases at an increasing rate and MP also rises.

2) Diminishing Returns to Factor

In the second phase, an additional variable factor adds less amount of output. It means TP increases at a diminishing rate and MP starts falling.

3) Negative Returns to Factor

It is the third phase of LVP in which the employment of an additional variable factor causes TP to decline and MP becomes negative therefore, this phase is known as the negative return.

Reasons for LVP Phases

Reasons for increasing return to factor.

• Better Utilization of Fixed Factor : In the first phase, the supply of the fixed factor is too large, whereas variable factors are too low. So, with an additional variable factor, the fixed factor is better utilized, and output increases at an increasing rate.
• Increased Efficiency of Variable Factor : When variable factors are increased and combined with fixed factors, there is great cooperation and a high degree of specialization. As a result, variable factors work efficiently.

Reasons for Diminishing Return to a Factor

• The optimum combination of factors : After making the optimum use, MP begins to diminish.
• Imperfect Substitutes : Diminishing returns occur because fixed and variable factors become imperfect substitutes for each other. There is a limit for which these can be substituted with one another. After that limit, they become imperfect substitutes which leads to diminishing returns.

Negative Returns to Factors

• Limitation of Fixed Factor : The negative return applies because some factors of production are fixed and cannot be increased in the short run.
• Poor Coordination between Variable and Fixed Factors: When Variable factors become too excessive about fixed factors, they then become obstructed with each other which leads to poor coordination.

Relationship between TP and MP

• As long as TP increases at an increasing rate, MP also increases.
• When TP increases at a diminishing rate, MP decreases.
• When TP reaches its minimum point, MP becomes zero.
• When TP starts decreasing, MP becomes negative.

Relationship between AP and MP

• As long as MP is more than AP, AP rises.
• When MP is equal to AP, AP is at its maximum.
• When MP is less than AP, AP falls.
• Both AP and MP fall but MP becomes negative whereas AP remains positive.

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Presenting to you Class 11 CBSE Best Handwritten Notes of Economics of Chapter 5 – Production Function .

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Production Function and Returns to a Factor Class 11 | Economics

Table of Contents

Production Function And Returns to a Factor Class 11 | Chapter 7 | Economics

Production refers to an activity by which inputs are transformed into output.

Input means factors of production such as land, labour, capital and enterprise.

Output means production. It is any commodity that comes out of production process.

Fixed And Variable Factors 

Fixed factors –  Fixed factors are those the application of which does not change with the change in the output and which can not be changed during short run. For example land, machine, building etc.

Variable factor – Variable factors are those the application of which changes with the change in the output and which can be changed during short run. For example labour, raw material etc.

Production function –   Production function studies the functional relationship between firm’s physical input and firm’s physical output of a commodity. It is expressed in terms of

Where, Qx – Output of Commodity X

L – Labour Input

K – Capital Input

Short Run and Long Run Production Function 

Short Run – Short run is a period of time when we can change only variable factors not fixed factors. Short run production function is a technological relationship between physical inputs where one factor is fixed and other is a variable factor. In this type of production function, output can be increased by increasing the units of L (variable factor) and K (fixed factor) remain constant. Production increases with increase in the variable factors, fixed factor remain constant in short run. It is also known as ‘Return to a factor’.

Long Run – Long run is a period of time in which a firm can change all the factors of production whether it be (variable or fixed) . In long run all factors are variable because a firm can change its fixed factors along with variable factors. Output increases by increasing the application of both the factors. It is also known as ‘Return to scale’.

Production Concept

1) Total product or Total physical product (TP or TPP) – Total product is a sum total of output produced by all units of a variable factor with some constant factors. It is also known as total return of the variable factor. 

TP = AP × L

2 ) Average product (AP or APP) – Average product is per unit product of a variable input.

Where, AP – Average product 

L – units of variable factor (Labour)

3) Marginal product (MP or MPP) – It refers to an addition to the total product when an additional unit of variable factor is used, keeping fixed factors constant.

MP=TP_n-TP_(n-1)     or    MP=∆TP/∆L

Relationship Between TP, AP AND MP

• When TP increases at increasing rate MP increases .
• When TP increases at diminishing rate, MP diminishes .
• When TP is maximum, MP is zero .
• When TP declines, MP negative .
• When TP stops increasing at increasing rate, MP is at its maximum. This point is known as point of inflexion.
• When AP rises, AP is less than MP.
• When AP at its maximum then AP is equals to MP .
• When AP falls then MP is less than AP .
• MP can be zero or negative.
• MP increases or decreases more rapidly than AP .

Return to a Factor or Law of Variable Proportions 

Law of variable proportions says that as more and more of the variable factor is combined with the fixed factor, MP of the variable factor may rise, but eventually a situation must come when MP of the variable factor starts declining. Marginal product become zero or even negative.

Assumptions of the Law

• Technology is given and remain constant.
• All the units of a variable factors are identical or equally efficient.
• There is a short period of operation.
• Factors of production are not perfectly substitute.

Rational Stage of Operation

• Stage 1 – There is a scope for more efficient utilization of fixed factor by employment more units of variable factors.
• Stage 3 – Employment of every additional unit of labour gives less and less of total output because MP is negative .
• Stage 2 – Producer will find equilibrium only in 2 nd stage when MP is zero and remain positive and TP is maximum .

Reason or Cause of Law of Variable Proportion 

Cause of Increasing Returns to a Factor –

• Optimum utilization of fixed factor – In the first stage, fixed factor remains underutilized. So when units of variable factor are employed, it leads to optimum utilization of fixed factor.
• Division of labour and increase in efficiency – With more units of variable factor, it is possible to divide the work among the labour according to their skill, knowledge and experience. This result is specialization.
• Better coordination between factors – So long as fixed factor remain underutilized, additional employment of variable factor tends to improve the coordination between the fixed and variable factors.

Causes of Decreasing Returns to a Factor –

• Scarcity of resources – Some factors of production are scarce and cause decrease in MP.
• Poor coordination between factors – When more and more units of variable factor is employed, a time comes when our fixed factor start being over used, so MP FALLS. Ideal ratio becomes disturbed.
• Lack of perfect substitution between factors – Factor of production are imperfect substitutes of each other. More and more labour cannot be continuously used in place of capital.

Postponement of the law 

Postponement of the law of variable proportion is possible under two situations

• When there is improvement in technology.
• When substitute of the fixed factor is discovered.

Constant Return to a factor 

This situation occurs between the situations of increasing returns to a factor and decreasing returns to a factor. It is a situation when MP of the variable factor remains constant even when more and more of variable factor is used.

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• Production Function

To understand production and costs it is important to grasp the concept of the production function and understand the basics in mathematical terms. We break down the short run and long run production functions based on variable and fixed factors. Let us get started!

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What is the production function.

The functional relationship between physical inputs (or factors of production) and output is called production function. It assumed inputs as the explanatory or independent variable and output as the dependent variable. Mathematically, we may write this as follows:

Q = f (L,K)

Here, ‘Q’ represents the output, whereas ‘L’ and ‘K’ are the inputs, representing labour and capital (such as machinery) respectively. Note that there may be many other factors as well but we have assumed two-factor inputs here.

Time Period and Production Functions

The production function is differently defined in the short run and in the long run . This distinction is extremely relevant in microeconomics . The distinction is based on the nature of factor inputs.

Those inputs that vary directly with the output are called variable factors. These are the factors that can be changed. Variable factors exist in both, the short run and the long run. Examples of variable factors include daily- wage labour, raw materials, etc.

On the other hand, those factors that cannot be varied or changed as the output changes are called fixed factors . These factors are normally characteristic of the short run or short period of time only. Fixed factors do not exist in the long run.

Consequently, we can define two production functions: short-run and long-run. The short-run production function defines the relationship between one variable factor (keeping all other factors fixed) and the output. The law of returns to a factor explains such a production function.

For example, consider that a firm has 20 units of labour and 6 acres of land and it initially uses one unit of labour only (variable factor) on its land (fixed factor). So, the land-labour ratio is 6:1. Now, if the firm chooses to employ 2 units of labour , then the land-labour ratio becomes 3:1 (6:2).

The long-run production function is different in concept from the short run production function. Here, all factors are varied in the same proportion. The law that is used to explain this is called the law of returns to scale . It measures by how much proportion the output changes when inputs are changed proportionately.

Solved Example for You

Question: What is meant by returns to a factor?

Answer: Returns to a factor is used to explain the short run production function. It explains what happens to the output when the variable factor changes, keeping the fixed factors constant. Thus, it can be said that ‘returns to a factor’ is a short run phenomenon.

Question: Production function is a _______.

• Catalogue of Output possibilities
• Catalogue of input possibilities
• Catalouge of price
• None of the above

Ans: The correct option is A. Production function is a catalogue of output possibilities

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Production and Costs

• Returns to Scale and Cobb Douglas Function
• Shapes of Total Product, Average Product and Marginal Product
• Total Product, Average Product and Marginal Product
• Behavior of Cost in the Short Run
• Long Run Cost Curves

2 responses to “Long Run Cost Curves”

That’s a lot fr easy explanation

nice 1 thanks a lot, very helpful

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Class 11 CBSE Economics Important Questions With Answers

Author : Aparna

Updated On : August 17, 2024

Overview:  Uncover the essential questions for Class 11 Economics that are vital for acing your exams. This article pinpoints key topics and questions to help streamline your study efforts.

Understanding the CBSE Class 11 Economics Syllabus for 2022 is essential for effective exam preparation.

• The syllabus is divided into two parts: Part A (Statistics for Economics) and Part B (Introductory Microeconomics).
• The theoretical portion of the exam is worth 80 marks, while the project work is worth 20 marks.

You can also download free study notes for Economics below.

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Economics Class 11 Important Questions with Answers

Economics is one of the optional subjects chosen for the  11th Commerce Subjects .  

• Practising important questions for Class 11 Economics can help you concentrate on the most valuable topics in the syllabus.
• To score well in this subject, focus on areas like statistics for economics, data collection, organization and presentation, consumer equilibrium, and demand.
• Using important questions can improve your efficiency and accuracy in your exam preparation.

Chapter Wise NCERT Class 11 Economics Important Questions

Solving Class 11 Economics Sample Papers will help you know the paper's difficulty level and the type of questions asked in the exam. Let us have a look at the chapter-wise important questions for class 11 economics and help improve your speed and accuracy in the exam.

Important Questions from Introduction to Micro Economics

Check the list of some important questions for class 11 economics chapter 1 provided here and enhance your preparation.

Q. Explain Diamond Water Paradox?

Ans. It is based on the principle of scarcity. Like water is useful, yet it is cheap due to its abundance in the economy. Diamonds are very expensive because they are scarce so,  people are ready to pay a high price.

Q. Only scarce goods attract price.” Comment.

Ans. The given statement is correct. All resources are not scarce in the economy. For example, the air we breathe is abundant in relation to wants. Such goods are available free of cost. These goods are known as Non-Economic Goods. On the other hand, some goods are scarce in relation to their wants. For example, petrol, electricity, etc. are scarce in relation to wants. These goods command price and are known as Economic Goods. So, it is rightly said that only scarce goods attract price.

Q. What does the slope of PPF indicate?

Ans. PPF is a downward sloping concave shaped curve.

•       (i)       Its downward slope indicates that in order to increase production of one good, another good need to be sacrificed
•       (ii)      Its concave shape indicates that More and More unit of one good sacrificed in order to produce one unit of another good.

Q.  “Scarcity and Choice go together”. Comment.

Ans. All of us want better food, clothing, housing, schooling, entertainment, etc. But resources are not enough to meet all our wants. Even the developed economies cannot satisfy all the needs of people. It means, scarcity of resources is a common feature of every economy and it gives rise to the problem of choice, i. e. how to make the best possible use of available resources. If resources were available in plenty, there would not have been any problem of choice. Hence, economics is concerned with the problem of choice under the conditions of scarcity.

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Q. “An economy always produces on, but not inside, a PPC”, Defend or refute the statement.

Ans. The given statement is refuted. An economy operates on PPF, only when resources are fully and efficiently utilized, it means, if there is unemployment or inefficient use of resources, then the economy may operate inside the PPC.

Important Questions from Consumer’s Behaviour

Go through all the important questions for the class 11 economics state board for the consumer's behaviour chapter.

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Q. Law of DMU operates only with continuous consumption.

Ans.  The law of diminishing marginal utility will operate only when consumption is a continuous process. For example, if one burger is consumed in the morning and another in the afternoon, then the second burger may provide equal or higher satisfaction as compared to the first one.

Q. “Define a budget line. When can it shift to the right?

Ans. Budget line is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer.

Budget Line shifts to the right when:

• (i) When there is an increase in income, assuming no change in prices of the two goods;
• (ii) When there is a decrease in prices of both goods, the consumer's income is assumed to be unchanged.

Q. What changes will take place in TU, when: (i) MU curve remains positive; (ii) MU becomes ‘0’ ; (iii) MU is negative.

Ans. (i) TU will increase, but a diminishing rate; (ii) TU will be maximum; (iii) TU starts falling.

Q. State the conditions of consumer’s equilibrium in the Indifference Curve Analysis and explain the rationale behind these conditions.

Ans. Let the only two goods the consumer consumes are X and Y. The two conditions of equilibrium are:

• (1) MRS XY =  
• (2) MRS falls as more of X is consumed in place of Y

The rationale behind these conditions:

• (1) Suppose MRS XY >  it means that to obtain one more unit of X , the consumer's willing to sacrifice more units of Y as compared to what is required in the market. It induces the consumer to buy more of X. As a result, MRS falls and continue to fall till it becomes equal to the ratio of prices and the equilibrium is established.
• Suppose MRS XY <  it means that to obtain one more unit of X , the consumer's willing to sacrifice less units of Y as compared to what is required in the market. It induces the consumer to buy less of X. As a result, MRS increases and continue to rise till it becomes equal to the ratio of prices and the equilibrium is established.
• (2) Unless MRS falls as consumer consumes more of X, the consumer will not reach equilibrium again.

Q. A consumer consumes only two goods X and Y whose prices are Rs.4 and Rs.5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibriumRs.Give reasons. What will a rational consumer do in this situation? Rs. Use utility analysis.

Ans. Given P X = 10, P Y = 15 and MU X = 50, MU Y = 45. A consumer will be in equilibrium when Substituting values, we find that: Or

Since per rupee MU X is higher than per rupee MU Y , the consumer is not in equilibrium.

The consumer will buy more of x and less of y. As a result MU X will fall and MU Y will rise. The reaction will continue till  are equal and consumer is in equilibrium.

Important Questions from Theory of Demand

Here, we have provided economics class 11 important questions chapter wise for the theory of demand.

Q. “Law of Demand is a Qualitative statement”. Comment.

Ans. Law of demand is only an indicative, and not a quantitative statement. It indicates only the direction, in which the demand will change with a change in price. It says nothing about the magnitude of such a change. For example, price of Pepsi rises from  Rs.10 to  Rs.12 per bottle, then, as per law of demand, wecan say that the demand for Pepsi will fall. But the law does not give the actual amount by which the demand for Pepsi will decline.

Q. Distinguish between an inferior good and a normal good. Is a good which is inferior for one consumer also inferior for all the consumers? Explain.

Ans. When with the rise in income of the consumer demand fora good increases, that good is a normal good for that consumer. If with rise in income demand for the good decreases than that good is inferior for that consumer. A good is not necessarily inferior for all the consumers. A good which is inferior for a higher income consumer may be a normal good for the lower income consumer. It is not the consumer but the income level of the consumer which determines whether a good is normal or inferior.

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Q. Derive the law of demand from the single commodity equilibrium condition “Marginal utility = Price”.

Ans. According to single commodity equilibrium condition, consumer purchases that much quantity of a good at which marginal utility (MU) is equal to price. Given, MU = price. Now suppose, price falls. It will make MU greater than the price and will encourage the consumer to buy more. It shows that when price falls demand rises.

Q. Distinguish between demand by an individual consumer and market demand of a good. Also state the factors leading to fall in demand by an individual consumer.

Ans. Demand by an individual refers to the quantity of a good the consumer is willing to buy at a price during a period of time. While market demand refers to the quantity of a good the consumers of that good are willing to buy at a price during a period of time.

The factors leading to fall in demand by an individual consumers are:

(I) Rise in own price of the normal good.

(ii) Fall in the price of substitute good.

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Q. Suppose there are two consumers in the market for good and their demand functions are as follows:

• d 1 (p) = 20 – p for any price less than or equal to 15, and d 1 (p) = 0 at any price greater than 15.
• D 2 (p) = 30 – 2p for any price less than or equal to 15, and d 1 (p) = 0 at any price greater than 15.

Find out the market demand function.

Ans. From the given demand functions, it can be seen that both the consumers do not want to demand the good for any price above Rs. 15. Both of them demand only at a price less than or equal to Rs. 15. Hence, the market demand will be: 

d market (p) = d 1 (p) + d 2 (p)

d market (p) = 20 – p + 30 – 2p

d market (p) = 50 – 3p for any price less than or equal to 15 and d market (p) = 0 at any price greater than 15.

Important Questions from Elasticity of Demand

Candidates can go through the economics class 11 important questions with answers for the elasticity of demand chapter.

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Q. Price elasticity of demand for Milk and Wheat are respectively (-) 0.9 and (-) 0.5. Demand for which one is more elastic and Why?

Ans. Demand for Milk is more elastic as with 1% fall in price of milk, its demand rises by 0.9%. However, in case of wheat, 1 % fall in price raises the demand by just 0.5%.

Q. Differentiate between law of demand and price elasticity of demand.

Ans. (i) Law of demand states the inverse relation between price of a commodity and its quantity demanded, assuming no change in other factors. On the other hand, price elasticity of demand indicates the rate of change in quantity demanded of the commodity due to change in its price.

(ii) Law of Demand reflects the direction of change in demand, whereas, price elasticity of demand measures the magnitude of change in demand.

Q. What is the price elasticity of demand for following demand curves: (i) Straight line demand curve parallel to X-axis; (ii) Straight line demand curve parallel to Y-axis.

Ans. The price elasticity of demand in the following cases will be: (i) Perfectly Elastic Demand; (ii) Perfectly Inelastic Demand.

Q. State with reasons, whether the following items will have elastic or inelastic demand: (i) Matchbox;

(ii) Cold Drink; (iii) Medicines; (iv) Salt; (v) Electricity; (vi) Cigarettes; (vii) Butter for a poor person.

(i) Matchbox has inelastic demand as consumer has to spend a very small proportion of his income.

(ii) Coke has elastic demand as it has number of substitutes.

(iii) Medicines have inelastic demand as their consumption cannot be postponed.

(iv) NCERT Textbook has inelastic demand as it is a necessity item.

(v) Electricity has elastic demand as it can be put to several uses.

(vi) Cigarettes have inelastic demand as its consumers are habituated.

(vii) Butter for a poor person has elastic demand as it is a luxury item for the poor person.

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Q.The price elasticity of demand for good × is known to be twice that of good Y. Price of X falls by 5% while that of good Y rises by 5%. What is the percentage change in the quantities demanded of X and  Y?

Percentage fall in price of X = 5%; Percentage rise in price of Y = 5%

Also, price elasticity (E d ) of X is twice of good Y Suppose, ed of Y is 1, then ed of X will be 2.

Therefore, a 5% fall in the price of good × will lead to a 10% rise in the demand for X and  a 5% rise in the price of good Y will lead to a 5% fall in the demand for Y.

Ans. Quantity of X will rise by 10%; Quantity of Y will fall by 5%

Important Questions from Theory of Production

Check the class 11 economics chapter 5 important questions from below.

Q. Why MP curve cuts AP curve at its maximum point?

Ans. It happens because when AP rises, MP is more than AP. When AP falls, MP is less than AP So, it is only when AP is constant and at its maximum point, that MP is equal to AP. Therefore, MP curve cuts AP curve at its maximum point.

Q. Can AP rise when MP starts declining?

Ans. Yes, AP can rise when MP starts declining. It can happen as long as falling MP is more than AP. However, when MP becomes equal to AP, then further decline in MP will also reduce the AP.

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Q. What are the different phases in the Law of Variable Proportions in terms of Total Product? Give reasons behind each phase. Use diagram.

Ans. The Phases are:

• Phase I: TP rises at increasing rate, i.e. upto A.
• Phase II: TP rises at decreasing rate, i.e. between A and B.
• Phase III: TP falls i.e. after B.
• Phase 1: Initially variable input is too small as compared to the fixed input, As production starts, there is efficient use of the fixed input, leading to rise in productivity of the variable input on account of division of labour. As a result, TP rises at increasing rate.
• Phase II: After a level of output, pressure on fixed input leads to fall in productivity of the variable input. As a result, TP continues to rise but at a decreasing rate.
• Phase III: The amount of variable input becomes too large in comparison to the fixed input causing decline in TP.

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Q4. Let the production function of a firm be: Q = 2L 2 K 2 . Find out the maximum possible output that the firm can produce with 5 units of L and 2 units of K. What is the maximum possible output that the firm can produce with zero unit of L and 10 units of K?

Hint: Maximum possible output with 5 units of L and 2 units of K

Given: Q = 2L 2 K 2 and L = 5 units; K-2 units

Putting the values of L and K in the given production function, we get:

Q = 2(5) 2 (2) 2 = 200 units

Maximum possible output with 0 unit of L and 10 units of K

Given: Q = 2L 2 K 2 and L = 0 unit; K = 10 units

Putting the values of Land K in the given production function, we get:

Q = 2(5) 2 (10) 2 = 0 unit.

Q. Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is: Q = 5L + 2K.

Hint: Given: Q = 5L + 2K. and L = 0 units; K- 10 units

Q = 5(0)+2(10)

Q or Maximum output = 20 units.

Important Questions from Theory of Cost

Let us have a look at Class 11 Economics important questions for theory of cost chapter.

Q.“The gap between AC and AVC keeps on decreasing with rise in output, but they never meet each other”. Comment.

Ans. The given statement is correct. The gap between AC and AVC keeps on decreasing because the difference between them is AFC, which falls with increase in output. However, AFC can never be zero. Therefore, AC and AVC can never meet each other.

Q. Why does the minimum point of AC curve fall towards right of AVC curve?

Ans. The minimum point of AC curve fall towards right of AVC curve because AC continues to fall due to decreasing AFC even after AVC starts rising.

Q.“MC can be calculated both from total cost and total variable cost and is not affected by total fixed cost”. Discuss

Ans. The given statement is correct. MC is not at all affected by total fixed cost (TFC). MC is addition to TC or TVC when one more unit of output is produced. As TFC remains same with increase in output, MC is independent of fixed cost and is affected just by change in variable costs.

Q. Calculate TFC, if AC and AVC are Rs. 22 and Rs. 18 respectively, at output of 10 units.

Ans. AFC = AC - AVC = Rs.22- Rs. 78 = Rs.4

TFC - AFC × units produced = Rs. 4×10 units

TFC = Rs. 40

Q. Classify the following as fixed cost and variable cost:

(i) Salary to manager of the company.

(ii) Wages to casual labour.

(iii) Payment of insurance premium for insurance of factory.

(iv) Payment for raw material.

(v) Payment of rent of Postpaid connection of Mobile Phone.

(vi) Interest on loan taken from ICICI.

(vii) Electricity charges beyond the minimum rent.

(viii) Payment of rent of the factory building to the landlord.

(ix) Commission to production manager on the basis of number of units produced.

(x) Payment of fuel used in machines.

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Ans. Fixed Cost: (i), (iii), (v), (vi), (viii); Variable Cost: (ii), (iv), (vii), (ix). (x).

Important Questions from Theory of Revenue

Check the Class 11 Economics important questions for the chapter theory of revenue from the post below.

Q.Why AR curve under monopolistic competition is more elastic than AR curve under monopoly?

Ans . AR curve under both the markets slope downwards. However, AR curve under monopolistic competition is more elastic as compared to AR curve under monopoly because of presence of close substitutes. AR curve is less elastic in monopoly because of no close substitutes.

Q. Under what market condition does Average Revenue always equal Marginal Revenue? Explain?

Ans. It is under the market condition when a firm can sell more at the given price that AR = MR throughout as production is increased by the firm. It is because the firm is a price taker. It means that price, which is same as AR, remains unchanged throughout. By the average - marginal relationship, AR remains unchanged only when AR = MR throughout.

Q. What is the relation between market price and marginal revenue of a price-taking firm?

Ans . Market price is equal to marginal revenue (MR). It happens because the price-taking firm can sell more quantity of output at the same price. It means, revenue from every additional unit (MR) is equal to price or average revenue (AR) as Price = AR.

Q. Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs. 10.

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Q. What would be shape of demand curve, so that TR curve is: (a) a positively sloped straight line passing through the origin; (b) a horizontal line?

• (a) Demand curve or AR curve will be a horizontal straight line parallel to the X-axis because positively sloped straight line TR curve passing through the origin indicates that price (orAR) remains constant at all levels of output.
• (b) Demand curve or AR curve will slope downwards from left to right because horizontal TR indicates that TR remains same at levels of output. It is possible only when price (or AR) falls with rise in output.

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Important Questions from Producer’s Equilibrium

 Go through the Class 11 Economics Important Questions of the producer's equilibrium provided in this post.

Q. Why should MC curve cut MR curve from below to achieve producer’s equilibrium?

Ans. One of the two conditions of the establishment of stable equilibrium of a firm is that its MC curve should cut the MR curve from below, not from above. If the MC curve cuts the MR curve from above, the equilibrium so established shall not be stable as it will be possible to add to profits by producing more. The idea is that beyond the point of equilibrium, the MC should be greater than MR so that further production becomes uneconomical.

Q. A table showing TC and TR of a firm is given. Calculate MC and MR and find out the equilibrium level of output.

The producer achieves equilibrium at 6 units of output. It is because this level of output satisfies both the conditions of producer’s equilibrium:

(i) MC is equal to MR; and

(ii) MC becomes greater than MR after this level of output.

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Q. The equality of marginal cost and marginal revenue is a condition necessary for equilibrium, but it is not by itself sufficient to assure the attainment of producer’s equilibrium. Comment.

Ans. The given statement is correct. Equality of marginal revenue (MR) and marginal cost (MC) is only one condition for the equilibrium of the firm. Another condition also needs to be fulfilled for the establishment of the firm’s equilibrium and that is: ‘MC must be greater than MR after MC = MR output level’.

Q. Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.

Ans. The producer’s equilibrium conditions are: (i) MC = MR; and (ii) MC > MR after equilibrium.

Suppose MC > MR: In this situation, it will be profitable for the firm to produce more or less depending upon relative changes in MC and MR till MC = MR.

Suppose MC < MR: It will be profitable for the producer to produce more till MC = MR.

MC= MR is not a sufficient condition to ensure equilibrium. Given MC = MR, suppose the behaviour of MC and MR is such that if one more unit is produced, MC becomes less than MR.

Then in this case it will be profitable for the firm to produce more. Therefore, in this case though MC = MR, the producer is not in equilibrium. However, if after MC = MR output, MC becomes greater than MR, it will be most advantageous for the firm to produce only upto MC = MR.

Q. Explain why will a producer not be in equilibrium if the conditions of equilibrium are not met.

Ans. The equilibrium conditions are: (i) MC = MR; and (ii) MC > MR after equilibrium.

Suppose MC = MR condition is not met. Let MC > MR. In this, it will be profitable for the firm to produce more or less depending upon the relative changes in MC and MR till MC = MR. Similarly, if MC < MR, it will also be profitable to produce more till MC = MR.

Now Suppose ‘MC > MR after equilibrium condition is not met’ and MC < MR after equilibrium. In this case, the firm will not be in equilibrium because it can increase its profits by producing more.

Important Questions from Supply

Here, we have provided Class 11 Economics important questions for the supply chapter. These questions will help candidates enhance their preparation for the exam.

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Q. What is the price elasticity of supply, when: (a) Supply curve passes through the origin; (b) Supply curve is a vertical straight line; (c) Supply curve is a horizontal straight line.

Ans. The price elasticity of supply in the following cases will be:

(i) Unitary elastic Supply

(ii) Perfectly Inelastic Supply

(iii) Perfectly Elastic Supply

Q. There are three different supply curves passing through the origin. Curve A makes an angle of 60°. Curve B makes an angle of 45° and curve C makes an angle of 30°. What will be the price elasticity of curves A, B and C?

Ans. All the three curves: A, B and C will have unitary elastic supply as they all are passing through the origin.

Q. Give one point of difference between individual supply and market supply.

Ans. Individual supply may not strictly follow Law of supply i. e. it is not necessary that supply for an individual always varies directly with price. However, market supply always follows law of supply, i.e. market supply always varies directly with price.

Q. ‘Supply curve is the rising portion of marginal cost curve over and above the minimum of Average Variable cost curve’. Do you agree? Support your answer with valid reason.

Ans. Yes, we do agree with the given statement. No rational producer would like to supply his output to the market if he is unable to recover his per unit variable cost as it would lead to losses between the range of minimum of marginal cost and minimum of average variable cost.

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Q. A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increases to Rs. 15 and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firm’s supply curve?

Price Elasticity of Supply (E s ) =  ×  =  ×  = 2

Important Questions from Main Market Forms

Go through the Class 11 Economics Important Questions here and prepare well for the upcoming exam.

Q. How does a firm under monopolistic competition exercise partial control over price?

Ans. A monopolistic competitive firm enjoys partial control over price. It happens because by incurring heavy selling cost, the firm is able to create a differentiated image of its product in the minds of consumers. Products are differentiated on the basis of brand, size, colour, shape, etc. Buyers are attracted to buy a particular product even at a relatively higher price.

Q. “Monopolistic Competition is competition with differentiated products.” Elucidate.

Ans. An important characteristic of monopolistic competition is product differentiation. The competing firms produce products which are close but not perfect substitutes of each other. The products are differentiated on the basis of brand, size, colour, shape, etc. It is on account of this product differentiation, firms have to incur huge selling costs to compete with other firms. So, it is rightly said that ‘Monopolistic Competition is competition with differentiated products’.

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Q. Why is the number of firms small in an oligopoly market? Explain.

Ans . The main reason for small number of firms under oligopoly is the ‘Barriers to Entry’, which prevent entry of new firms into the industry. Patents, requirement of large capital, control over crucial raw materials, etc, are some of the other reasons, which prevent new firms from entering into industry. As a result, there are few firms in an oligopoly market.

Q. What happens to profits in the long run if firms are free to enter in the industry?

Ans. When existing firms are earning profit, freedom of entry induces new firms to enter the industry. This raises market supply which in turn leads to fall in market price. Profits fall and continue to fall, till each firm is earning zero economic profit or normal profit.

Q. Explain the ‘Implications’ of the following:

(i) ‘Large Number of Buyers’ under Perfect Competition

(ii) ‘Freedom of Entry and Exit’ to firms under Perfect Competition

(iii) ‘Inter-dependence between Firms’ under Oligopoly

(iv) ‘Non-price Competition’ under Oligopoly

(v) ‘Large number of Sellers’ under Perfect Competition

(vi) ‘Homogeneous Products’ under Perfect Competition

(vii) ‘Barriers to Entry of New Firms’ under Oligopoly

(viii) ‘Few Big Sellers’ under Oligopoly

(ix) ‘Product Differentiation’ under Monopolistic Competition

(x) ‘Perfect Knowledge’ under Perfect Competition

(i) Implication is that no individual buyer is in a position to influence the market price on its own by changing his individual demand.

(ii) Implication is that when existing firms are making profits, new firms enter, raise the output of industry, bring down the market price enough for the firm to earn just only normal profit in the long run. The opposite happens if the existing firms are facing losses.

(iii) Implication is that an individual firm takes into consideration the likely reaction of its rival firms before making a move to change price or output. It is possible because it is assumed that rival firms may react.

(iv) Non-price competition means competition between firms by means other than changing price, like free gift, home service, customer care etc. Implication is that firms in oligopoly prefer non-price competition to avoid price-war because the firm who starts the price-war may be the ultimate loser.

(v) Implication is that no single firm is in a position to influence the market price on its own by changing its own output. Thus, price remains unchanged.

(vi) Implication is that no firm can charge a higher price because no buyer is willing to pay the same. Thus, market price remains the same for all the firms.

(vii) Implication is that such barriers allow only a limited number of firms into oligopoly industries. Such barriers may be in the form of huge capital requirements, patent rights, availability of crucial raw materials etc.

(viii) Implication is that each big seller contributes a fairly large share of total output. This gives an individual seller the power of influencing the market price by changing its own output.

(ix) Implication is that buyers differentiate products of firms various as different. So, they are willing to pay different prices for the products of different firms. This product differentiation gives the power to an individual firm to influence the market price on their own.

(x) Implication is that buyers are fully aware of price in market and sellers of technique of production. Knowledge by buyers further implies that no buyer is willing to pay a higher price for the product of any firm. Knowledge by sellers implies that cost of production is same for all producers.

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Important Questions from Price Determination

Here is the list of Class 11 Economics Important questions for the price determination chapter.

Q. Explain the effect of increase in income of buyers of a ‘normal’ commodity on its equilibrium price.

Ans. An increase in income of buyers will increase the demand for normal goods at the given price. It will lead to excess demand. This leads to competition among buyers, which raises the price. Increase in price leads to rise in supply and fall in demand. These changes continue till supply and demand become equal at a new equilibrium price. As there is an increase in demand only, equilibrium price rises.

Q. What will be the effect on equilibrium price and equilibrium quantity, when price of complementary goods increases?

Ans. When price of complementary goods increases, keeping other factors constant, then demand for the given commodity decreases since it becomes relatively expensive to consume the two commodities (the given commodity and its complement) together. It will lead to excess supply. This leads to competition among sellers, which reduces the price. Fall in price leads to decrease in supply and rise in demand. These changes continue till supply and demand become equal at a new equilibrium price. As there is a decrease in demand only, both equilibrium price and equilibrium quantity will fall.

Q. If market demand function is given as: Q MD = 25 - 2P and market supply as: Q MS = 3P, then what will be the equilibrium price and equilibrium

Ans. At equilibrium, Q MD = Q MS It means, 25 -2P = 3P Or, 5P = 25

P or Equilibrium Price = Rs. 5.

Putting the value of equilibrium price in the equation of market demand function:

Equilibrium Quantity= 25-2×5=15 units.

Q. Explain the effects of ‘Maximum Price Ceiling’ on the market of a good. Use diagram.

Ans.  Maximum Price Ceiling refers to imposition of upper limit on the price of a good by the government. For example, in the diagram, OP is Price Ceiling, while equilibrium price is OPv At this price, the producers are willing to supply only PA (Or OQ 1 ), while consumers demand PB (Or OQ 1 ). The effect of the ceiling is that shortage, equal to A B (Q 1 Q 2 ), is created, which may further lead to black marketing,

Q. What are the effects of ‘price-floor’ (Minimum Price Ceiling) on the market of a good? Use diagram.

Ans. When government imposes lower limit on a price that may be charged for a particular good or service, it is called Minimum Price Ceiling, e.g. price OP 1 . At this price, the producers are willing to supply P 1 B or (OQ 2 ), while consumers demand only P 1 A (= OQ 1 ). Unable to sell, all they want to sell, the producers may try to illegally sell below the minimum price.

Class 11 Economics is a vital subject that lays the groundwork for understanding complex economic concepts and principles. Focusing on important questions allows you to streamline your preparation, ensuring a solid grasp of key topics and enhancing your performance in exams. By practising these questions, you can build a strong foundation for future studies in economics and related fields.

Key Takeaways

• Targeted Study: Focusing on important questions helps you concentrate on the most critical topics in Economics.
• Concept Mastery: Regular practice ensures a deeper understanding of fundamental economic principles.
• Better Exam Performance: By concentrating on key questions, you improve your chances of scoring well in exams.
• Enhanced Analytical Skills: Working through these questions develops your ability to analyze and interpret economic data.
• Foundation for Future Studies: Mastering these important questions prepares you for more advanced studies in Economics and related disciplines.

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Important MCQs of Production Function of Microeconomics class 11 CBSE

• December 8, 2021
• Uncategorized , 11th Economics CBSE , Production Function

Looking for important MCQs of production function chapter with answers and explanation of microeconomics class 11 CBSE, ISC and State Board.

Multiple Choice Question of Production Function chapter with answers of Microeconomics class 11 CBSE

Let’s Practice

Function showing relationship between input and output is known as _____________ .

a) Consumption Function b) Investment Function c) Production Function d) Cost Function

Ans – c)

Explanation:-

Which of the following statements accurately describe the relationship between AP and MP?

a) AP rises when MP is above it and falls when MP is below it b) AP and MP are always parallel to each other c) Mp intersects AP at its maximum point d) AP is always rising when MP is falling and vice-versa

Ans – a), c)

What is ‘production’ in economics

a) Creation/Addition to the value of output b) Production of foodgrains c) Creation of Services d) Manufacturing of goods

Ans – a)

When PM is Zero, what can you say about TP?

a) TP is increasing b) TP is maximum c) TP is falling d) None of the above

Ans – b)

When a total product falls, then _________ .

a) average product is equal to zero b) marginal product is equal to zero c) marginal product is negative d) average product continues to rise

Explanation:- When MP is negative, TP starts to diminish.

Marginal Product refers to addition to total output when one more:

a) Unit is produced b) Unit is sold c) Unit is consumed d) Unit of a variable factor is employed

Ans – d)

The period of time in which the plant capacity can be varied is known as:

a) Short-run b) Long run c) Both a) and b) d) Neither a) nor b)

_______ is the extension of the “Law of Diminishing Returns”.

a) Law of variable Proportions b) Law of Demand c) Law of Equi-marginal utility d) Law of Diminishing Marginal Utility

Law of Variable Proportions is also known as:

a) Law of Returns to Scale b) Returns of Variable Factor c) Law of Returns to Factor d) All of these

Ans – b), C)

Average Product (AP) is at its maximum when

a) MP > AP b) MP < AP c) MP = AP d) MP becomes negative

Explanation:- Relationship between AP and MP

i) AP increases as long as MP > AP ii) AP decreases when MP < AP iii) AP is maximum when AP = MP

The maximum possible output for a firm with two units of labour (L) and ten units of capital (k), if its production function is given as: 5L + 2L

a) 0 units b) 30 Units c) 200 Units d) 50 Units

Identify the phase in which TP increases at an increasing rate and MP also increases.

a) Increasing returns to a factor b) Diminishing returns to a factor c) Negative returns to a factor d) None of these

In which time period, all factors of production become variable and factors of production change with the change in level of production?

a) Long period b) Market Period c) Short Period d) All of these

Which of the following is not a reason for the operation of increasing returns to a factor?

a) Better utilization of fixed factor b) Limitation of fixed factor c) Increase in efficiency of the variable factor d) Imperfect Substitutes

Ans – b), d)

In the first stage of the Law of Variable Proportions, the total product increases at an _________ .

a) decreasing rate b) increasing rate c) constant rate d) Both a) and b)

Explanation:- In the initial phase of production, all factors of production are highly efficient and hence, TP increases at an increasing rate with employment of each additional variable factor.

When the average product increases, the marginal product is:

a) Less than average product b) Equal to the average product c) More the average product d) None of these

What happens to AP, when MP is more than AP?

a) AP rises b) AP falls c) AP remains constant d) None of these

Increasing returns in applicable because of ____________ .

a) increased efficiency of the variable factor b) fuller utilisation of fixed factor c) indivisibility of factors d) Both a) and b)

Explanation:- Attainment of increasing returns to factor depends upon how the fixed factors are utilised along with the variable factors of production.

What is the behaviour of TP, when MP becomes negative?

a) TP increases at an increasing rate b) TP increases at a diminishing rate c) TP is at its maximum point d) TP decreases

According to the Law of Variable Proportions, there are __________ phases.

a) 1 b) 3 c) 2 d) 4

Law of variable proportion is valid when __________ .

a) at least one input is fixed and all other inputs are kept variable b) all factors are kept constant c) all inputs are varied in the same proportion d) None of the above

Explanation:- at least one input is fixed and all other inputs are kept variable

The average product can not be negative because:

a) Total product can never be zero b) Total product can never be negative c) Neither a) nor b) d) Both a) and b)

The law of diminishing returns refers to an eventual fall in:

a) Productivity of factors of production b) Total earnings of the firm c) Marginal product of the variable factor d) None of these

The 2nd phase (diminishing returns to a factor) is exhibited by the following total product sequence:

a) 50, 50, 50, 50 b) 50, 110, 180, 260 c) 50, 100, 150, 200 d) 50, 90, 120, 140

Which of the following curve is not ‘U’ shaped?

a) AFC b) AVC c) MC d) AC

Explanation:- AFC curve is rectangular hyperbola shaped in nature as TFC remains fixed for all levels of output including zero.

Which phase of Law of Variable Proportions has been ruled out on the grounds of technical inefficiency:

a) Increasing returns of a factor b) Diminishing returns of a factor c) Negative returns to a factor d) None of these

A rational producer always aims to operate in _ of Law of Variable Proportions:

a) 1st Phase (Increasing returns of a factor) b) 2nd Phase (Diminishing returns of a factor) c) 3rd Phase (Negative returns of a factor) d) Either 1st Phase or 2nd Phase

Payment made to outsiders for their goods and services is called ___________ .

a) Opportunity cost b) Real Cost c) Explicit Cost d) Implicity cost

In general, most of the production functions measure:

a) Productivity of factors of production b) Economics relation between the factors of production c) Technical relation between inputs and output d) None of these

Product per unit of labor employed is termed as:

a) Average product b) Marginal product c) Total product d) None of these

When the average cost curve is rising, then marginal cost curve __________ .

a) must be decreasing b) must be constant c) must be rising d) Any of these

Explanation:- MC curve lies above the AC curve when AC is increasing thus, marginal cost also increases with an increase in AC.

When AP is maximum, MP is equal to:

a) AP b) TP c) Zero d) ONe

Variable factors refer to those factors of production:

a) Which can be only changed in the long run b) Which can be changed in the short run c) Which can never be changed d) Which vary directly with output

As output increases, the average fixed cost curve ________ .

a) remains constant b) starts falling c) starts rising d) None of these

Explanation:- As output increases, AFC tends to fall continuously but it never becomes zero as TFC is always positive.

Ans – Both AP and MP curves are generally:

a) U-shaped b) Inversely U-shaped c) Rising d) Falling

In describing a given production technology, the short run is best described as lasting:

a) UP to six months from now b) Up to five years from now c) As long as all inputs are fixed d) As long as at least one input is fixed

The area under the MC curve is __________ .

a) total cost b) total fixed cost c) total variable cost d) None of these

Explanation:- TVC can be derived by adding each unit of MC, thus the area under the MC curve is known as TVC.

_________ is the period of time in which all the factors of production are variable.

a) Short-run b) Long run c) Medium-run d) None of these

The ‘Marginal Product’ of a variable input is best described as:

a) Product divided by the number of units of variable input b) Additional output resulting from a unit increase in the variable input c) Change in the total product when one more unit of a variable factor is employed d) Additional output resulting from a unit increase in the units produced

Average Revenue is equal to __________ .

a) Total Revenue/Quantity Sold b) Average Revenue/2 c) Total Revenue/100 d) Average Quantity/Quantity sold * 2

What is the maximum point of TP?

a) When AP becomes Zero b) When MP becomes Zero c) When MP cuts AP d) None of these

Average Product can have:

a) Positive values only b) Negative values only c) Both positive as well as negative values d) Neither positive nor negative values

When the firm is producing 3 tonnes of sugar, it receives total revenue of ₹ 24. Raising production to 4 tonnes increases total revenue to ₹ 28. Thus, marginal revenue is _______ .

a) ₹ 4 b) ₹ 8 c) ₹ 28 d) ₹ 52

Which of the following is correct?

a) When MP is positive and falling, TP rises at a decreasing rate. b) When MP is rising, TP rises at an increasing rate. c) When MP is negative, TP rises d) All of these

Ans – a), b)

At the point of Inflexion:

a) Total Product is maximum b) Average Product is maximum c) Marginal Product is maximum d) Marginal Product is zero

If AR is ₹40 per unit from the sale of 3 goods and it is ₹30 per unit from the sale of 4 goods. Find the marginal revenue of the 4th unit of goods.

a) ₹ 10 b) ₹ 30 c) ₹ 40 d) ₹ 0

When AP falls due to increase in quantity of variable input:

a) MP < AP b) MP = AP c) MP > AP d) None of these

The Law of __ deals with the input-output relationship, when the output is increased by varying the quantity of one input.

a) Variable Proportions b) Supply c) Demand d) Equi-marginal utility

According to the Law of Variable Proportions, when we increase the quantity of only one input keeping other inputs fixed, _ initially increases at an increasing rate, then at a decreasing rate and finally at a negative rate.

a) Total product b) Average Product c) Marginal Product d) None of these

Which of the following is not a phase in the Law of Variable Proportions?

a) Increasing returns to a factor b) Constant returns to a factor c) Diminishing returns of a factor d) Negative returns to a factor

The total output generated by the first four units of a variable input is 200 units, 350 units, 450 units, and 500 units. The marginal product of the third unit of input is:

a) 50 units b) 100 units c) 150 units d) 200 units

If TP of employing one unit of a variable factor is 12 units and that of 2 units of a variable factor is 16 units. The marginal product of 2 units of variable factor is:

a) 3 units b) 4 units c) 8 units d) 16 units

When marginal product rises, total product: (Choose the correct alternative)

a) Falls b) Rises c) Can rise or can fall d) Remains constant

The average product curve in the input-output plane will be ________. (Choose the correct alternative)

a) an ‘S-shaped curve b) an inverse ‘S-shaped curve c) a ‘U’ shaped curve d) an inverse ‘U’ shaped curve

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• List of Commerce Articles
• Important Questions Class 11 Economics Part B Unit 3

Important Questions Class 11 Economics Part B Unit 3- Producer Behaviour and Supply

Important Questions with Answers for CBSE Class 11 Economics Part B Unit 3 – Producer Behaviour and Supply which is outlined by expert Economic teachers from the latest version of CBSE (NCERT) books

Does Total Physical Product increase only when Marginal Physical Product increases?

False, because when Total Physical Product increases Marginal Physical Product decreases but remains positive.

What will be the marginal product when the total product is maximum?

Marginal Product will be zero when the total product is maximum.

Total Physical Product is derived from Marginal Physical Product by?

(a) Cumulative addition

(b) Cumulative subtraction

(c) Cumulative product

(d) Cumulative Division

What do you mean by production?

Production is the method of producing or developing goods or services in large quantities with the help of various materials.

Increase in Total Physical Product indicates that there are increasing returns to a factor. Comment.

No, the total physical product also rises when the returns to a factor decrease.

When the returns to a factor decline the marginal and the total product also decline?

False, when returns to a factor decline only Marginal Physical Product declines.

Evaluate the marginal product for the following.

Why does the Average Fixed Cost curve never touch the “x” axis though it lies very close to the x-axis?

The Average Fixed Cost Curve (AFC) never touches the “x” axis though it lies very close to the x-axis because Total Fixed Cost can never be zero.

Production function shows a technical relationship between physical input and output of a commodity.

(a) A technological relationship between inputs and cost

(b) The economic relationship between inputs and cost

(c) A technological relationship between inputs and output

(d) A technological relationship between inputs and price

Question 10

The shape of the Total Physical Product short run is

(a) Inverse U-Shaped

(b) U-Shaped

(c) Hyperbola

(d) V-Shaped

Question 11

In the short run Total Product Price changes with the change in which of the following factors.

(a) Economic Cost

(b) Fixed Cost

(c) All the factors

(d) Variable Cost

Question 12

When TVC is zero at zero levels of output, what happens to TFC or why TFC is not zero at zero level of output?

When TVC is zero at zero levels of output, what happens to TFC or why TFC is not zero at zero levels of output because the fixed cost is to be acquired even at zero levels of output.

Question 13

What is a change in quantity demanded?

It is a change along a demand curve. The change is due to a change in price and quantity of a commodity. The two types of change in quantity demand are Extension in demand and Contraction in demand.

Question 14

Define cost concept. What are the different types of cost?

The spending experienced on different inputs is known as the cost.

The different types of cost are as follows:

Money Cost- Total money spent by a company for manufacturing goods.

Explicit Cost & Implicit Cost- Payment made to an outsider are explicit and cost of self-supplied inputs are implicit cost.

Real Cost- All hard work, discomforts, sacrifices involved in manufacturing a product is called real cost.

Opportunity Cost- This the cost for the next best alternative foregone.

Short Run Cost- Fixed cost- Fixed factors cost

Variable Cost – Variable factor cost

Question 15

Explain the relation between Average Cost and Marginal Cost.

The relation between Average Cost and Marginal Cost

1. When Average Cost decreases, Marginal Cost declines faster than the Average Cost. So, that Marginal Cost curve remains lower than the Average Cost curve. This means Average Cost > Marginal Cost.

2. When Average Cost increases, Marginal Cost rises faster than the Average Cost. So, that MC curve is above the Average Cost curve.

3. Marginal Cost curve intersects Average Cost curve from its lowest point. When the average curve is minimum then Marginal Cost=Average Cost.

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Commerce Aspirant » Economics Class 11 MCQs » Production Function Class 11 MCQ

• Production Function Class 11 MCQ

Production Function Class 11 MCQ Questions Economics are covered in this Article. Production Function Class 11 MCQ Test contains 30 questions. Answers to MCQs on Production Function Class 11 Economics are available after clicking on the answer. This MCQ has been made for Class 11 students to help check the concept you have learned from detailed classroom sessions and the application of your knowledge.

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Production Function Class 11 MCQ Questions Economics

1.________ is an expression of the technological relationship between inputs and outputs of an item.

(a) Production

(b) Revenue function

(c) Production function

(d) All of the above

Answer: (c) Production function

2. _______ refers to the transformation of inputs into output.

Answer: (a) Production

3. Production function specifies_______.

(a) Maximum output produced with a given output

(b) Minimum quantity of inputs needed to produce

(c) Both (a)&(b)

(d) None of the above

Answer: (c) Both (a)&(b)

4. Production function is defined concerning;

(b) Technology

(d) Entrepreneurship

Answer: (b) Technology

5. A period in which output can be changed by changing only variable factors

(a) Long run

(b) Short-run

(c) Fixed run

(d) Factor run

Answer: (b) Short-run

6. Which of the following are fixed inputs?

(b) Machinery

(c) Building

Answer: (d) All of the above

7. ______ refers to a period in which output can be changed by changing all factors of production.

Answer: (a) Long run

8. The long-run period is ______ concept.

(a) Economical

(b) Functional

(c) Productional

Answer: (b) Functional

9. Factors in the short run are classified as;

(a) Variable

10. In the short run ______ is more active in price determination.

Answer: (b) Demand

11. Read the following statement given below and choose the correct alternative

Statement 1- Input refers to the volume of goods produced by a firm or an industry During a specific period.

Statement 2- Total product is the total quantity of goods produced by a firm in a given period with given inputs

(a) Both are correct

(b) Both are incorrect

(c) Statement 1 is correct and statement 2 is incorrect

(d) Statement 1 is incorrect and statement 2 is correct

Answer: (d) Statement 1 is incorrect and statement 2 is correct

12. Read the following statement given below and choose the correct alternative.

Statement 1- Output per unit of a variable input is termed as an average product.

Statement 2- Average product is also known as an average return.

Answer: (a) Both are correct

13. Read the following statement given below and choose the correct alternative.

Statement 1- Addition to total product when more units of the variable factor are employed is known as Average product.

Statement 2- MP= TP-TP1

Answer: (b) Both are incorrect

14. ______ refers to the increase in the total product when only one factor is increased.

(a) Production factor

(b) Returns to a factor

(c) Returns to inputs

(d) Law of Diminishing returns

Answer: (b) Returns to a factor

15. Law of variable proportions is also known as;

(a) Law of returns

(b) Law of returns to factors

(c) Returns to variable factors

16. Read the following statement given below and choose the correct alternative.

Assertion- In the first phase of the law of variable proportions, TP rises at an increasing rate and MP increases.

Reason- In the third phase of the law of variable proportions, TP falls and MP becomes negative.

(a) Both Assertion and Reason are true. The reason is the correct explanation of the assertion

(b) Both Assertion and reason are not true. The reason is not the correct explanation of the assertion

(c) The assertion is true but the reason is not

(d) The reason is true but the assertion is not

Answer: (b) Both Assertion and reason are not true. The reason is not the correct explanation of the assertion

17. Read the following statement given below and choose the correct alternative.

Assertion- Phase one of the Law of variable proportions is known as increasing returns to a factor.

Reason- Phase two of the Law of variable proportions is known as increasing returns to a factor.

Answer: (c) The assertion is true but the reason is not

18. Which of the following are reasons for the law of variable proportions?

(a) Better utilisation of fixed factors

(b) Indivisibility of fixed factors

(c) Increased efficiency of variable factors.

19. Which of the following are the reasons for diminishing returns to a factor?

(a) Over utilisation of fixed factors

Answer: (a) Over utilisation of fixed factors

20. Which of the following are the reasons for negative returns to a factor?

(a) Limitation of fixed factors

(b) Poor coordination between variable and fixed factors

21. Which of the following are the assumptions of Law of variable proportions.

(a) Law of variable proportion applies to the field of production only.

(b) The effect of change in output can be easily determined.

(c) It operates in short run

22. The state of technology in Law of variable proportions is______.

(a) Increasing with output

(b) Decreasing with output

(c) Constant

(d) Negative

Answer: (c) Constant

23. When MP is zero TP is ______.

(a) Constant

(b) Maximum

(c) Minimum

Answer: (b) Maximum

24. As TP increases, MP______.

(a) Increases

(b) Decreases

(c) Remains unchanged

(d) Remains constant

Answer: (a) Increases

25. When TP starts decreasing, MP becomes______.

Answer: (d) Negative

26. When AP is maximum MP=

Answer: (a) AP

27. Calculate TP at 3rd unit.

Answer: (a) 64

28. Calculate MP at 4th unit.

Answer: (c) 46

29. Fill in the blanks with correct option.

Answer: (b) 10

30. Identify the phase in the following table

(a) First phase

(b) Second phase

(c) Third phase

Answer: (a) First phase

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Question 1:

Explain the concept of a production function.

The production function of a firm depicts the relationship between the inputs used in the production process and the final output. It specifies how many units of different inputs are needed in order to produce the maximum possible output. Production function is written as:

Q x = f ( L , K )

Q x represents units of output x produced.

L represents units of labour employed.

K represents units of capital employed.

The above equation explains that Q x, units of output x are produced by employing L and K units of labour and capital respectively and by a given technology. As the given level of technology appreciates, the output will increase with the same level of capital and labour units.

Page No 50:

Question 2:.

What is the total product of an input?

Where, ∑ represents summation of all outputs and Q x represents units of output x produced by an input.

Question 3:

What is the average product of an input?

TP = Total product

L = units of labour employed

Question 4:

What is the marginal product of an input?

Marginal Product is defined as the additional output produced because of the employment of an additional unit of labour. In other words, it is the change in the total output brought by employing one additional unit of labour. Algebraically, it is expressed as the ratio of the change in the total product to the change in the units of labour employed, i.e.

TP n = Total product produced by employing n units of labour

TP n −1 = Total product produced by employing ( n − 1) units of labour

Question 5:

Explain the relationship between the marginal products and the total product of an input.

Relationship between marginal products (MP) and the total product (TP) can be represented graphically as

1) TP increases at an increasing rate till point K, when more and more units of labour are employed. The point K is known as the point of inflexion. At this point MP (second part of the figure) attains its maximum value at point U.

2) After point K, TP increases but at a decreasing rate. Simultaneously, MP starts falling after reaching its maximum level at point U.

3) When TP curve reaches its maximum and becomes constant at point B, MP becomes zero.

4) When TP starts falling after B, MP becomes negative.

5) MP is derived from TP by

Question 6:

Explain the concepts of the short run and the long run.

In short run, a firm cannot change all the inputs, which means that the output can be increased (decreased) only by employing more (less) of the variable factor (labour). It is generally assumed that in short run a firm does not have sufficient or enough time to vary its fixed factors such as, installing a new machine, etc. Hence, the output levels vary only because of varying employment levels of the variable factor.

Algebraically, the short run production function is expressed as

Q x = units of output x produced

L = labour input

In long run, a firm can change all its inputs, which means that the output can be increased (decreased) by employing more (less) of both the inputs − variable and fixed factors. In the long run, all inputs (including capital) are variable and can be changed according to the required levels of output. The law that explains this long run concept is called returns to scale . The long run production function is expressed as

Both L and K are variable and can be varied.

Question 7:

What is the law of diminishing marginal product?

Law of diminishing Marginal Product

According to this law, if the units of the variable factor keeps on increasing keeping the level of the fixed factor constant, then initially the marginal product will rise but finally a point will be reached after which the marginal product of the variable factor will start falling. After this point the marginal product of any additional variable factor will be zero, and can even be negative.

Question 8:

What is the law of variable proportions?

Law of Variable Proportions

According to the law of variable proportions, if more and more units of the variable factor (labour) are combined with the same quantity of the fixed factor (capital), then initially the total product will increase but gradually after a point, the total product will start diminishing.

Question 9:

When does a production function satisfy constant returns to scale?

Constant returns to scale will hold when a proportional increase in all the factors of production leads to an equal proportional increase in the output. For example, if both labour and capital are increased by 10% and if the output also increases by 10%, then we say that the production function exhibits constant returns to scale.

Algebraically, constant returns to scale exists when

f ( nL , nK ) = n. f ( L , K )

This implies that if both labour and capital are increased by ‘ n ’ times, then the production also increases by ‘ n ’ times.

Question 10:

When does a production function satisfy increasing returns to scale?

Increasing returns to scale (IRS) holds when a proportional increase in all the factors of production leads to an increase in the output by more than the proportion. For example, if both the labour and the capital are increased by ‘ n ’ times, and the resultant increase in the output is more than ‘ n ’ times, then we say that the production function exhibits IRS.

Algebraically, IRS exists when

f ( nL , nK ) > n. f ( L , K )

Page No 51:

Question 11:.

When does a production function satisfy decreasing returns to scale?

Decreasing returns to scale (DRS) holds when a proportional increase in all the factors of production leads to an increase in the output by less than the proportion. For example, if both labour and capital are increased by ‘ n ’ times but the resultant increase in output is less than ‘ n ’ times, then we say that the production function exhibits DRS.

Algebraically, DRS exists when

f ( nL , nK ) < n. f ( L , K )

Question 12:

Briefly explain the concept of the cost function.

The functional relationship between the cost of production and the output is called the cost function. It is expressed as

C = f ( Q x )

C = Cost of production

Q x = Units of output x produced

In other words, the output-cost relationship for a firm is depicted by the cost function.

The cost function depicts the least cost combination of inputs associated with different output levels.

Question 13:

What are the total fixed cost, total variable cost and total cost of a firm? How are they related?

Total Fixed Cost (TFC)

This refers to the costs incurred by a firm in order to acquire the fixed factors for production like cost of machinery, buildings, depreciation, etc. In short run, fixed factors cannot vary and accordingly the fixed cost remains the same through all output levels. These are also called overhead costs.

Total Variable Cost (TVC)

This refers to the costs incurred by a firm on variable inputs for production. As we increase quantities of variable inputs, accordingly the variable cost also goes up. It is also called ‘Prime cost’ or ‘Direct cost’ and includes expenses like − wages of labour, fuel expenses, etc.

Total Cost (TC)

The sum of total fixed cost and total variable cost is called the total cost.

Total cost = Total fixed cost + Total variable cost

TC = TFC + TVC

Relationship between TC, TFC, and TVC

1) TFC curve remains constant throughout all the levels of output as fixed factor is constant in short run.

2) TVC rises as the output is increased by employing more and more of labour units. Till point Z, TVC rises at a decreasing rate, and so the TC curve also follows the same pattern.

3) The difference between TC and TVC is equivalent to TFC.

4) After point Z, TVC rises at an increasing rate and therefore TC also rises at an increasing rate.

5) Both TVC and TFC is derived from TC i.e. TC = TVC + TFC

Question 14:

What are the average fixed cost, average variable cost and average cost of a firm? How are they related?

Average Fixed Cost:

It is defined as the fixed cost per unit of output.

TFC = Total fixed cost

Q = Quantity of output produced

Average Variable Cost:

It is defined as the variable cost per unit of output.

TVC = Total variable cost

Average Cost:

It is defined as the total cost per unit of output. Average cost is derived by dividing total cost by quantity of output.

AC is also defined as the sum total of average fixed cost and average variable cost.

AC = AFC + AVC

Relationship between AC, AFC, AVC:

1) AVC and AFC are derived from AC as AC = AFC + AVC.

2) The plot for AFC is a rectangular hyperbola and falls continuously as the quantity of output increases.

3) The minimum point of AVC will always exist to the left of the minimum point of AC; i.e., point ‘Z’ will always lie left to point ‘M’.

4) AFC being a rectangular hyperbola falls throughout; this causes the difference between AC and AVC to keep decreasing at higher output levels. However, it should be noted that AVC and AC can never intersect each other. If they intersect at any point, it would imply that AC and AVC are equal at that point. However, this is not possible as AFC will never be zero because it is a rectangular hyperbola that never touches x -axis.

5) AC inherits shape from AVC’s shape and it is because of law of variable proportions that both the curves are U-shaped.

Question 15:

Can there be some fixed cost in the long run? If not, why?

No, there cannot be any fixed cost in the long run. In the long run, a firm has enough time to modify factor ratio and can change the scale of production. There is no fixed factor as the firm can change quantity of all the factors of production and therefore there cannot be any fixed cost in the long-run.

Question 16:

What does the average fixed cost curve look like? Why does it look so?

Average fixed cost curve looks like a rectangular hyperbola. It is defined as the ratio of TFC to output. We know that TFC remains constant throughout all the output levels and as output increases, with TFC being constant, AFC decreases.

When output level is close to zero, AFC is infinitely large and by contrast when output level is very large, AFC tends to zero but never becomes zero. AFC can never be zero because it is a rectangular hyperbola and it never intersects the x -axis and thereby can never be equal to zero.

Question 17:

What do the short run marginal cost, average variable cost and short run average cost curves look like?

The short run marginal cost (SMC), average variable cost (AVC) and short run average cost (SAC) curves are all U-shaped curves. The reason behind the curves being U-shaped is the law of variable proportion. In the initial stages of production in the short run, due to increasing returns to labour, all the costs (average and marginal) fall. In addition to this in the short run MP of labour also increases, which implies that more output can be produced by per additional unit of labour, leading all the costs curves to fall. Subsequently with the advent of constant returns to labour, the cost curves become constant and reach their minimum point (representing the optimum combination of capital and labour). Beyond this optimum combination, additional units of labour increase the cost, and as MP of labour starts falling, the cost curve starts rising due to decreasing returns to labour.

Question 18:

Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?

SMC curve always intersect the AVC curve at its minimum point. This is because to the left of the minimum point of AVC, SMC is below AVC. SMC and AVC both fall but the former falls at a faster rate. At the minimum point K, AVC is equal to SMC. Beyond K, AVC and SMC both rise but the latter rises at a faster rate than the former and also SMC lies above AVC. Therefore, the only point where SMC and AVC are equal is where SMC intersects AVC, i.e., at the minimum point of the AVC curve.

Question 19:

At which point does the SMC curve cut the SAC curve? Give reason in support of your answer.

SMC curve intersects SAC curve at its minimum point. This is because as long as SAC is falling, SMC remains below SAC and when SAC starts rising, SMC remains above SAC. SMC intersects SAC at its minimum point P, where SMC = SAC.

Question 20:

Why is the short run marginal cost curve ‘U’-shaped?

The SMC curve is a U-shaped curve due to the law of variable proportions. In order to understand the reason behind the U-shape of SMC, let us divide the SMC curve (UAB) into three different parts according to the law of variable proportions:

UA part corresponds to increasing returns to factor.

Minimum point A corresponds to constant returns to factor.

AB part corresponds to decreasing returns to factor.

In the initial production stages, the falling part of SMC (UA) is due to application of increasing returns to factor. Then the SMC stops falling and reaches its minimum point ‘A’ due to the existence of constant returns to a factor.

After the minimum point A, SMC starts rising (i.e. ‘AB’ part of SMC) due to the onset of decreasing returns of variable factor. This trend of SMC curve (initially falling, then becoming constant at its minimum point and then rising) makes it look like the English alphabet − ‘U’.

Question 21:

What do the long run marginal cost and the average cost curves look like?

The long run marginal cost (LMC) and long run average cost (LAC) are U shaped curves. The reason behind them being U-shaped is due to the law of returns to scale. It is argued that a firm generally experiences IRS during the initial period of production followed by CRS, and lastly by DRS. Consequently, both LAC and LMC are U-shaped curves. Due to IRS, as the output increases, LAC falls due to economies of scale. Then falling LAC experiences CRS at Q 1 level of output which is also called the optimum capacity. Beyond Q 1 level of output, the firm experiences diseconomies of scale and if the firm continues to produce beyond Q 1 level, the cost of production will rise.

Question 22:

The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.

Question 23:

The following table gives the average product schedule of labour. Find the total product and marginal product schedules. It is given that the total product is zero at zero level of labour employment.

Question 24:

The following table gives the marginal product schedule of labour. It is also given that total product of labour is zero at zero level of employment. Calculate the total and average product schedules of labour.

Question 25:

The following table shows the total cost schedule of a firm. What is the total fixed cost schedule of this firm?

Calculate the TVC, AFC, AVC, SAC and SMC schedules of the firm.

Page No 52:

Question 26:.

The following table gives the total cost schedule of a firm. It is also given that the average fixed cost at 4 units of output is Rs 5/-. Find the TVC, TFC, AVC, AFC, SAC and SMC schedules of the firm for the corresponding values of output.

Question 27:

A firm’s SMC schedule is shown in the following table. The total fixed cost of the firm is Rs 100. Find the TVC, TC, AVC and SAC schedules of the firm.

Question 28:

Find out the maximum possible output that the firm can produce with 100 units of L and 100 units of K .

L = 100 units of labour

K = 100 units of capital

Putting these values in equation (1)

Thus, the maximum possible output that he firm can produce is 500 units.

Question 29:

Let the production function of a firm be Q = 2 L 2 K 2 .

Find out the maximum possible output that the firm can produce with 5 units of L and 2 units of K . What is the maximum possible output that the firm can produce with zero unit of L and 10 units of K ?

a) Q = 2 L 2 K 2 (1)

L = 5 units of labour

K = 2 units of capital

Q = 2 (5) 2 (2) 2

= 2 (25) (4)

Q = 200 units

b) If L = 0 units and K = 100 units

Q = 2 (0) 2 (100) 2

Q = 0 units

Question 30:

Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q = 5 L + 2 K .

Q = 5 L + 2 K (1)

If L = 0 and K = 10, then putting these values in equation (1)

Q = 5 (0) + 2 (10)

= 20 units of output

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