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CBSE Questions for Class 11 Commerce Economics Production And Costs Quiz 6 - MCQExams.com
CBSE
Class 11 Commerce Economics
Production And Costs
Quiz 6
In an increasing cost industry expansion in production leads to __________.
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decrease in factor prices
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increase in factor prices
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no change in factor prices
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fall in consumer demand
"Law of diminishing returns" or "Law of variable proportion" operate in ___________.
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long run
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short run
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very long period
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none of the above
Explanation
For the law of diminishing returns or variable proportions to operate, at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns or law of variable proportions to operate.
Total output at 7th unit is _______.
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36
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55
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48
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60
The short run is characterized by ___________.
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at least one fixed factor of production and firms neither leaving nor entering the industry
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a period where the law of diminishing returns does not hold
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no variable input, i.e., all of the factors of production are fixed
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all inputs being variable
Explanation
The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run. Firms in perfect competition can make super normal/subnormal profits in the short run as firms are allowed to enter and exit the market only in the long run.
To economists, the main difference between the short run and the long run is that _____________.
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in the short run all inputs are fixed, while in the long run all inputs are variable
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in the short run the firm varies all of its inputs to find the least-cost combinations of inputs
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in the short run, at least one of the firm's inputs levels is fixed.
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in the long run, the firm is making a constrained decision about how to use existing plant and equipment efficiently
Explanation
The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run.
In the long run all factors are variable as producers have enough time to organize all factor inputs in the appropriate proportions to achieve the minimum efficient scale.
When total product decreases and marginal product becomes negative, it is known as __________.
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stage of negative returns
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stage of diminishing returns
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stage of increasing returns
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stage of constant returns
Explanation
Diminishing returns occur when the
marginal product
of the variable input is
negative
. That is when a unit increase in the variable input causes
total product
to fall.
"Law of Returns to Scale" is a _________ concept.
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short run
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long run
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very short period
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none of above
Explanation
The long-run is a long enough period in which we can alter both fixed and variable factors.
The laws of returns to scale refer to an increase in output due to an increase in all factors in the same proportion.
Hence in the long run only we can increase all factors in the same proportion..
So b will be the correct answer.
In describing a given production technology, the short run is best described as lasting __________.
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upto six months from now
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upto five years from now
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as long as all inputs are fixed
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as long as at least one input is fixed
Explanation
Short run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the short run as long as at-least one factor of production is fixed.
The "law of diminishing returns" applies to _________.
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the short run, but not the long run
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the long run, but not the short run
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both the short run and the long run
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neither the short run nor the long run
Explanation
For the law of diminishing return to operate at least one factor needs to be fixed, as only then can factor proportions be changed, this happens in the short run. In the long run all factors are variable and thus it is not possible for the law of diminishing returns to operate.
In economics, _______ is a period where all factors/inputs are variable.
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long run
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short run
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very short period
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none of above
Explanation
In the long run all factors are variable as producers have enough time to organize all factor inputs in the appropriate proportions to achieve the minimum efficient scale.
Whether a firm will plan for short-run or long-run production depends upon the __________.
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nature of demand for its product
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availability of inputs
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state of technology
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all of the above
When marginal cost equals average total cost, ________.
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average total cost is falling
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average total cost is rising
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average total cost is maximised
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average total cost is minimized
Explanation
When the MC curve is lower than the AC curve, ie the MC $$\le$$ AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower. At some point the MC will stop falling and begin rising to a point where it will meet the AC curve. Thus only when the MC $$\ge$$ AC will the AC curve begin to rise as now a higher number is being added, and the new average must be higher. Thus the point that the MC meets the AC curve, has to be its minimum point.
Which of the following is true of the relationship between the marginal cost function and the average cost functions?
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If MC is greater than ATC, then ATC is falling.
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The ATC curve intersects the MC curve at minimum MC.
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The MC curve intersects the ATC curve at minimum ATC.
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If MC is less than ATC, then ATC is increasing.
In the long run _____________.
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all inputs except labour can be varied, and so total variable cost remains unchanged but fixed cost is equal to zero
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all inputs, such as labour, equipment and offices or factories can be varied, and so total variable and fixed costs are lower
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all inputs, such as labour, equipment and offices or factories can be varied, and so total variable cost is equal to total cost since fixed cost is equal to zero
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all inputs, such as labour, equipment and offices or factories can be varied, and so average fixed cost is lower
Explanation
In the long run as there are no fixed costs of production, as all factors can be varied and adjusted according to the minimum efficiency scale. Thus the value of fixed cost in the long run is 0 and LAC = LVC
Stage I of Law of Variable Proportions ends where the AP ______.
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begins to fall
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is maximum and constant
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is minimum
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begins to rise
Which of the following statements about the relationship between marginal cost and average cost is correct?
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When MC is falling, AC is falling
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AC equals MC at MC's lowest point
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When MC exceeds AC, AC must be rising
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When AC exceeds MC, MC must be rising
Explanation
When the MC curve is lower than the AC curve, i.e., the MC $$<$$ AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower. At some point the MC will stop falling and begin rising to a point where it will meet the AC curve. Thus only when the MC $$>$$ AC will the AC curve begin to rise as now a higher number is being added, and the new average must be higher. Thus at the point where the MC meets the AC curve, AC has to be at its minimum point.
Which of the following statements is correct?
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When the average cost is rising, the marginal cost must also be rising.
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When the average cost is rising, the marginal cost must be falling.
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When the average cost is rising, the marginal cost is above the average cost.
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When the average cost is falling, the marginal cost must be rising.
Explanation
When the MC curve is lower than the AC curve, ie the MC $$\le$$ AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower. At some point the MC will stop falling and begin rising to a point where it will meet the AC curve. Thus only when the MC $$\ge$$ AC will the AC curve begin to rise as now a higher number is being added, and the new average must be higher. Thus the point that the MC meets the AC curve, has to be its minimum point.
Which of the following statement is true?
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In short run, some of the factors of production are fixed and other may vary.
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In short run, all the factors of production are fixed.
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In short run, all the factors of production are variable.
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In short run, there are no fixed factors of production.
Explanation
Short run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the short run as long as at-least one factor of production is fixed.
Which of the following is a true statement?
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Constant returns to scale is a short-run concept, and decreasing returns to scale is a long-run concept.
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Increasing returns to scale is a short-run concept, and diminishing returns to production is a long-run concept.
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Decreasing returns to scale is a short-run concept, and diminishing returns to production are two ways of stating the same thing.
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None of the above is true.
The term ______ is defined as that length of time over which the firm gets an opportunity to vary if need be the quantities of all its inputs.
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short run
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long run
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very short period
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all of the above
Explanation
Long run does not correspond to a specific time frame, rather is varies by the industry of operation, and sometimes it can even vary between different firms in the same industry. A firm is considered to be in the long run when it has the opportunity to vary all factors of production.
When marginal costs are below average total costs, _______________.
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average fixed costs are rising
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average total costs are falling
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average total costs are rising
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average total costs are minimized
Explanation
When the MC curve is lower than the AC curve, ie the MC
≤
≤
AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower. At some point the MC will stop falling and begin rising to a point where it will meet the AC curve. Thus only when the MC
≥
≥
AC will the AC curve begin to rise as now a higher number is being added, and the new average must be higher. Thus the point that the MC meets the AC curve, has to be its minimum point.
Which of the following sentence depicts the correct relationship between average cost and marginal cost?
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When average cost falls with an increase in output, marginal cost is less than the average cost.
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Marginal cost curve cuts the average cost curve at its minimum point.
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With an increase in average cost, marginal cost rises at a faster rate.
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All of the above.
Explanation
solution:
The relationship between the marginal cost and average cost is the same as that between any other marginal-average quantities. When marginal cost is less than average cost, average cost falls and when marginal cost is greater than average cost, average cost rises.
option b is true because (see figure) it do cut at its lowest point
hence the correct opt: D
Suppose the first four units of a variable input generate corresponding total outputs of 200, 350, 450,The marginal product of the third unit of input is ______.
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59
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100
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150
0%
200
The marginal cost for a firm of producing the 9th unit of output is Rs. $$20$$. Average cost at the same level of output is Rs. $$15$$. Which of the following must be true?
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Marginal cost and average cost are both falling
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Marginal cost and average cost are both rising
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Marginal cost is rising and average cost is falling
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It is impossible to tell if either of the curves are rising or falling
Laws of production does not include _________.
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returns to scale
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law of diminishing returns to a factor
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law of variable proportions
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least cost combination of factors
When the total fixed cost of producing $$100$$ units is Rs. $$30$$ and the average variable cost Rs. $$3$$, total cost is equal to _________.
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Rs. $$3$$
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Rs. $$30$$
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Rs. $$270$$
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Rs. $$330$$
Explanation
TC = TVC + TFC
TVC= AVC * q
= Rs. 3 * 100 units
= Rs. 300
Therefore, TC= Rs. 30+300
TC= Rs. 330
Identify which statement is correct (true) and which statement is incorrect (false)-
W. The average product is at its maximum when marginal product is equal to average product.
X. The law of increasing returns to scale relates to the effect of changes in factor proportions.
Y. Economies of scale arise only because of indivisibilities of factor proportions
Z. Internal economies of scale can accrue only to the exporting sector.
Select the correct answer from the options given below:
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W- true; X-false; Y- false; Z- false
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W- true; X- true; Y- true; Z- true
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W- false; X- true; Y- true; Z- false
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W- true; X- false; Y- false; Z-true
Which of the following statements concerning the long-run average cost curve is false?
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It represents the least-cost input combination for producing each level of output.
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It is derived from a series of short-run average cost curves.
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The short-run cost curve at the minimum point of the long-run average cost curve represents the least-cost plant size for all levels of output.
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None of the above.
Explanation
The long run cost curve is an envelope curve of all the short run cost curves. It shows the lowest per unit cost of producing each level of output when all inputs have been adjusted. The short run at the minimum of the LRAC, represents the optimum plant size as at this level of output the firm can produce their output at the lowest possible cost.
Which of the following are included in domestic territory?
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Territory lying within political frontiers including territorial waters
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Ships and aircrafts operated by residents of the country between two or more countries
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Embassies, consulates and military establishments of the country located abroad
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All of the above
Explanation
Following are the items included in domestic territory:
Political frontiers including territorial waters and airspace.
Embassy, consulates, military bases located abroad
Ships, aircraft, etc. operated by the residents between two or more countries
Fishing vessels, oil, and natural rigs, etc. operated by residents in the international waters or other areas over which country enjoys exclusive rights or jurisdiction.
Hence, correct answer is option D.
The positively sloped part of the long run average total cost curve is due to which of the following?
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Diseconomies of scale
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Increasing returns
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The firm being able to take advantage of large-scale production techniques as it expands its output.
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The increase in productivity that results from specialization.
Explanation
In the long run economies turn into diseconomies of scale. Hence the long run average cost curve starts sloping positively. It rises. Thus, the positive sloped (i.e., rising) part of the long run average total cost curve is due to diseconomies of scale.
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