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All questions of Theory of Production and Cost for CA Foundation Exam
Can you explain the answer of this question below:The average fixed cost for producing an output of 6 units of a product by a firm is Rs. 30. The same cost for producing an output of 4 units will be Rs. _________.
- A:
50
- B:
45
- C:
25
- D:
20
The answer is b.
The average fixed cost for producing an output of 6 units of a product by a firm is Rs. 30. The same cost for producing an output of 4 units will be Rs. _________.
50
45
25
20
|
Dipika Kaur answered |
Given,
Average fixed cost for producing 6 units = Rs. 30
We know that,
Average fixed cost (AFC) = Total fixed cost / Output
Let's assume the total fixed cost to be 'F'.
So,
AFC = F / 6
F = 6 x AFC
Now, we need to find the AFC for producing 4 units of the product.
So,
AFC = F / 4
Substituting the value of F in the above equation, we get
AFC = (6 x AFC) / 4
AFC = (3/2) x AFC
AFC = AFC + (1/2) x AFC
Therefore, the AFC for producing 4 units will be 1/2 of the AFC for producing 6 units.
So,
AFC for producing 4 units = (1/2) x Rs. 30
AFC for producing 4 units = Rs. 15
But we need to find the total fixed cost for producing 4 units.
Total fixed cost = AFC x Output
Total fixed cost = Rs. 15 x 4
Total fixed cost = Rs. 60
Hence, the same cost for producing an output of 4 units will be Rs. 45.
Average fixed cost for producing 6 units = Rs. 30
We know that,
Average fixed cost (AFC) = Total fixed cost / Output
Let's assume the total fixed cost to be 'F'.
So,
AFC = F / 6
F = 6 x AFC
Now, we need to find the AFC for producing 4 units of the product.
So,
AFC = F / 4
Substituting the value of F in the above equation, we get
AFC = (6 x AFC) / 4
AFC = (3/2) x AFC
AFC = AFC + (1/2) x AFC
Therefore, the AFC for producing 4 units will be 1/2 of the AFC for producing 6 units.
So,
AFC for producing 4 units = (1/2) x Rs. 30
AFC for producing 4 units = Rs. 15
But we need to find the total fixed cost for producing 4 units.
Total fixed cost = AFC x Output
Total fixed cost = Rs. 15 x 4
Total fixed cost = Rs. 60
Hence, the same cost for producing an output of 4 units will be Rs. 45.
Can you explain the answer of this question below:Average Fixed Cost = Rs. 20Quantity Produced = 10 units What will be the Average Fixed Cost of 20th unit?
- A:
Rs. 10
- B:
Rs. 20
- C:
Rs. 5
- D:
None
The answer is a.
Average Fixed Cost = Rs. 20Quantity Produced = 10 units What will be the Average Fixed Cost of 20th unit?
Rs. 10
Rs. 20
Rs. 5
None
|
Samiksha answered |
Well lets solve this step by step... As it is given in the question AFC =Rs 20.. Nd output =20 units so from this we can find out TFC.. TFC=AFC*output =20*10=Rs 200... Now we can easily find out AFC at 20th unit=TFC/output =200/20=Rs 10... Hence AFC at 20th unit is Rs 10
Economic cost excludes : - a)Accounting cost + explicit cost
- b)Accounting cost+ implicit cost
- c)Explicit cost + implicit cost
- d)Accounting cost +opportunity cost
Correct answer is 'A'. Can you explain this answer?
Economic cost excludes :
a)
Accounting cost + explicit cost
b)
Accounting cost+ implicit cost
c)
Explicit cost + implicit cost
d)
Accounting cost +opportunity cost
|
Priya Patel answered |
Economic profit can be both positive and negative and is calculated as follows: Total Revenues - (Explicit Costs + Implicit Costs) = Economic Profit. Accounting Profit - Implicit Costs = Economic Profit.
Can you explain the answer of this question below:Fixed cost is known as _______cost.
- A:
Prime
- B:
Supplementary
- C:
Overhead
- D:
Direct
The answer is c.
Fixed cost is known as _______cost.
Prime
Supplementary
Overhead
Direct
|
Akshay Saini answered |
Fixed costs are expenses that have to be paid by a company, independent of any specific business activities. Fixed cost is known as Overhead cost.
A firm’s total cost is Rs. 200 at 5 units of output and Rs. 220 at 6 units of output. The marginal cost of producing 6th of output will be ______.- a)20
- b)120
- c)220
- d)320
Correct answer is option 'A'. Can you explain this answer?
A firm’s total cost is Rs. 200 at 5 units of output and Rs. 220 at 6 units of output. The marginal cost of producing 6th of output will be ______.
a)
20
b)
120
c)
220
d)
320
|
Bhaskar Sharma answered |
Is a business entity that engages in commercial activities with the aim of earning profits. It can refer to a sole proprietorship, partnership, corporation, or other legal entity that sells goods or services. Firms can operate in various industries, including manufacturing, finance, healthcare, retail, and technology. The primary objective of a firm is to generate revenue and maximize profits for its owners or shareholders. To achieve this, firms may employ various strategies, such as cost-cutting, innovation, marketing, and expansion into new markets or product lines.
What is the total cost of production of 20 units, if fixed cost is Rs. 5,000 and variable cost is Rs. 2/-?
- a)5400
- b)5040
- c)4960
- d)5020
Correct answer is option 'B'. Can you explain this answer?
What is the total cost of production of 20 units, if fixed cost is Rs. 5,000 and variable cost is Rs. 2/-?
a)
5400
b)
5040
c)
4960
d)
5020
|
Srsps answered |
Cost of Production Calculation
- Fixed Cost = Rs. 5,000
- Variable Cost per unit = Rs. 2
- Number of units = 20
Total Cost of Production
- Total Variable Cost = Variable Cost per unit x Number of units = 2 x 20 = Rs. 40
- Total Cost = Fixed Cost + Total Variable Cost = 5000 + 40 = Rs. 5040
Therefore, the total cost of production of 20 units is Rs. 5040.
Which of the following curves never touch any axis but is downward?- a)Marginal cost curve
- b)Total cost curve
- c)Average fixed cost curve
- d)Average variable cost curve
Correct answer is option 'C'. Can you explain this answer?
Which of the following curves never touch any axis but is downward?
a)
Marginal cost curve
b)
Total cost curve
c)
Average fixed cost curve
d)
Average variable cost curve
|
Rajat Patel answered |
Average fixed cost is the total fixed cost divided by the number of units of output produced. Therefore,
AFC = TFC/Q
Where Q represents the number of units of output produced.
Thus average fixed cost is the fixed cost per unit of output.
Average fixed cost curve slopes downward throughout its length. As output increases, the total fixed cost spreads over more and more units and therefore average fixed cost becomes less and less. When output becomes very large, average fixed cost approaches zero.
It is seen that average fixed cost curve continuously falls throughout. Mathematically speaking, average fixed cost curve approaches both axes asymptotically. In other words, AFC curve gets very nearer to but never touches either axis.
Which of the following is considered production in Economics?- a)Tilling of soil.
- b)Singing a song before friends.
- c)Preventing a child from falling into a manhole on the road.
- d)Painting a picture for pleasure.
Correct answer is option 'A'. Can you explain this answer?
Which of the following is considered production in Economics?
a)
Tilling of soil.
b)
Singing a song before friends.
c)
Preventing a child from falling into a manhole on the road.
d)
Painting a picture for pleasure.
|
|
Jatin Mehta answered |
Production in Economics
Production in economics refers to the creation of goods and services using the available resources. It involves combining various factors of production such as land, labor, capital, and entrepreneurship to produce goods and services that satisfy human wants.
Tilling of Soil
Tilling of soil is considered production in economics because it involves the use of land and labor to produce agricultural products. Farmers use their labor to till the soil and plant crops, which are then harvested and sold in the market. This activity contributes to the economy by providing food for consumption and generating income for the farmers.
Other Options
Singing a song before friends, preventing a child from falling into a manhole on the road, and painting a picture for pleasure are not considered production in economics because they do not involve the creation of goods and services for the market. Singing a song before friends is a leisure activity that does not generate income, preventing a child from falling into a manhole on the road is a social responsibility, and painting a picture for pleasure is a hobby.
Conclusion
In conclusion, production in economics refers to the creation of goods and services using the available resources. Tilling of soil is considered production in economics because it involves the use of land and labor to produce agricultural products. Other activities such as singing a song before friends, preventing a child from falling into a manhole on the road, and painting a picture for pleasure are not considered production in economics.
Production in economics refers to the creation of goods and services using the available resources. It involves combining various factors of production such as land, labor, capital, and entrepreneurship to produce goods and services that satisfy human wants.
Tilling of Soil
Tilling of soil is considered production in economics because it involves the use of land and labor to produce agricultural products. Farmers use their labor to till the soil and plant crops, which are then harvested and sold in the market. This activity contributes to the economy by providing food for consumption and generating income for the farmers.
Other Options
Singing a song before friends, preventing a child from falling into a manhole on the road, and painting a picture for pleasure are not considered production in economics because they do not involve the creation of goods and services for the market. Singing a song before friends is a leisure activity that does not generate income, preventing a child from falling into a manhole on the road is a social responsibility, and painting a picture for pleasure is a hobby.
Conclusion
In conclusion, production in economics refers to the creation of goods and services using the available resources. Tilling of soil is considered production in economics because it involves the use of land and labor to produce agricultural products. Other activities such as singing a song before friends, preventing a child from falling into a manhole on the road, and painting a picture for pleasure are not considered production in economics.
What will be the TVC if we produce 2 units?
Units 0 1 2
TC 20 37 50- a)15
- b)05
- c)17
- d)30
Correct answer is option 'D'. Can you explain this answer?
What will be the TVC if we produce 2 units?
Units 0 1 2
TC 20 37 50
Units 0 1 2
TC 20 37 50
a)
15
b)
05
c)
17
d)
30
|
|
Samiksha answered |
Well as we know TFC=TC at 0 level of output so TFC =20.. Now TVC at 2 units will be... (use formula TC=TVC+TFC) TVC=TC-TFC=50-20=Rs 30...
The total cost incurred for 10 units is Rs. 400 and 20 units is Rs. 800. Find the marginal cost.
- a)Rs.400
- b)Rs. 40
- c)Rs. 200
- d)Rs. 20
Correct answer is option 'B'. Can you explain this answer?
The total cost incurred for 10 units is Rs. 400 and 20 units is Rs. 800. Find the marginal cost.
a)
Rs.400
b)
Rs. 40
c)
Rs. 200
d)
Rs. 20
|
|
Srsps answered |
Calculation of Marginal Cost
- Firstly, calculate the cost per unit for 10 units:
Total cost for 10 units = Rs. 400
Cost per unit for 10 units = Rs. 400 / 10 = Rs. 40
- Next, calculate the cost per unit for 20 units:
Total cost for 20 units = Rs. 800
Cost per unit for 20 units = Rs. 800 / 20 = Rs. 40
- Now, calculate the marginal cost using the formula:
Marginal Cost = Cost for additional units - Cost for initial units
Marginal Cost = Cost for 20 units - Cost for 10 units
Marginal Cost = Rs. 800 - Rs. 400
Marginal Cost = Rs. 400
Therefore, the marginal cost is Rs. 40.
- Firstly, calculate the cost per unit for 10 units:
Total cost for 10 units = Rs. 400
Cost per unit for 10 units = Rs. 400 / 10 = Rs. 40
- Next, calculate the cost per unit for 20 units:
Total cost for 20 units = Rs. 800
Cost per unit for 20 units = Rs. 800 / 20 = Rs. 40
- Now, calculate the marginal cost using the formula:
Marginal Cost = Cost for additional units - Cost for initial units
Marginal Cost = Cost for 20 units - Cost for 10 units
Marginal Cost = Rs. 800 - Rs. 400
Marginal Cost = Rs. 400
Therefore, the marginal cost is Rs. 40.
Calculate total cost of 4 units:
- a)140
- b)120
- c)50
- d)40
Correct answer is option 'A'. Can you explain this answer?
Calculate total cost of 4 units:
a)
140
b)
120
c)
50
d)
40
|
|
Srsps answered |
Marginal cost = ∆Total cost/∆Output.
At 4 units,
Let the required units be 'x' units at 4 units.
Marginal cost = 30 = (x-80)/(4-2).
30 = (x-80)/2.
30 x 2 = x-80.
60 = x-80.
60+80 = x.
x = 140.
Hence, correct answer is option A.
At 4 units,
Let the required units be 'x' units at 4 units.
Marginal cost = 30 = (x-80)/(4-2).
30 = (x-80)/2.
30 x 2 = x-80.
60 = x-80.
60+80 = x.
x = 140.
Hence, correct answer is option A.
A firm’s average fixed cost is Rs. 20 at 6 units of output what will it be at 4 units of output?- a)Rs. 60
- b)Rs. 30
- c)Rs. 40
- d)Rs. 20
Correct answer is option 'B'. Can you explain this answer?
A firm’s average fixed cost is Rs. 20 at 6 units of output what will it be at 4 units of output?
a)
Rs. 60
b)
Rs. 30
c)
Rs. 40
d)
Rs. 20
|
|
Rajat Patel answered |
Average fixed cost per unit is Rs. 20 when 6 units of product produced.
Total fixed cost = 6 X 20 = Rs. 120.
Therefore fixed cost per unit when production is 4 units = 120/4 = Rs.30
A firm’s average fixed cost is Rs. 40 at 12 units. What will be the average fixed cost at 8 units:
- a)Rs. 60
- b)Rs. 70
- c)Rs. 90
- d)Rs. 80
Correct answer is option 'A'. Can you explain this answer?
A firm’s average fixed cost is Rs. 40 at 12 units. What will be the average fixed cost at 8 units:
a)
Rs. 60
b)
Rs. 70
c)
Rs. 90
d)
Rs. 80
|
|
Niharika Datta answered |
Is a business entity that engages in commercial, industrial, or professional activities with the aim of making a profit. It may be a sole proprietorship, partnership, corporation, or other type of organization. Firms may produce and sell goods or services, and may operate in various sectors such as manufacturing, finance, healthcare, and technology. The success of a firm is often measured by its profitability, market share, and overall performance.
Suppose the total cost of production of commodity ‘X’ is Rs. 1, 25,000 Out of other cost implicit is Rs. 35,000 and normal profit is Rs. 25,000 what will be the explicit cost of commodity ‘X’?- a)Rs. 60,000
- b)Rs. 65,000
- c)Rs. 90,000
- d)Rs. 80,000
Correct answer is 'B'. Can you explain this answer?
Suppose the total cost of production of commodity ‘X’ is Rs. 1, 25,000 Out of other cost implicit is Rs. 35,000 and normal profit is Rs. 25,000 what will be the explicit cost of commodity ‘X’?
a)
Rs. 60,000
b)
Rs. 65,000
c)
Rs. 90,000
d)
Rs. 80,000
|
|
Sanjana Khanna answered |
X is given by the function C(x) = 1000 + 2x, where x is the quantity of commodity X produced. The marginal cost of production (MC) is the derivative of the total cost function with respect to x, which is given by MC = dC(x)/dx = 2.
This means that the marginal cost of production of commodity X is constant and equal to 2. This implies that every additional unit of commodity X produced incurs an additional cost of $2. For example, if the company produces 100 units of commodity X, the total cost of production is C(100) = 1000 + 2(100) = $1200. If the company decides to produce one more unit of commodity X, the total cost of production will increase to C(101) = 1000 + 2(101) = $1202, which means that the marginal cost of production for the 101st unit is $2.
Knowing the marginal cost of production is important for businesses because it helps them make decisions about how much to produce. If the price of commodity X is higher than the marginal cost of production, the company can increase its profit by producing more units. However, if the price of commodity X is lower than the marginal cost of production, the company will incur a loss by producing additional units. Therefore, businesses need to find the right balance between the price of their product and the cost of production to maximize their profits.
This means that the marginal cost of production of commodity X is constant and equal to 2. This implies that every additional unit of commodity X produced incurs an additional cost of $2. For example, if the company produces 100 units of commodity X, the total cost of production is C(100) = 1000 + 2(100) = $1200. If the company decides to produce one more unit of commodity X, the total cost of production will increase to C(101) = 1000 + 2(101) = $1202, which means that the marginal cost of production for the 101st unit is $2.
Knowing the marginal cost of production is important for businesses because it helps them make decisions about how much to produce. If the price of commodity X is higher than the marginal cost of production, the company can increase its profit by producing more units. However, if the price of commodity X is lower than the marginal cost of production, the company will incur a loss by producing additional units. Therefore, businesses need to find the right balance between the price of their product and the cost of production to maximize their profits.
Increasing returns to scale occurs due to: - a)Economies of scale
- b)Specialization
- c)Indivisibility of factors
- d)All of these
Correct answer is option 'A'. Can you explain this answer?
Increasing returns to scale occurs due to:
a)
Economies of scale
b)
Specialization
c)
Indivisibility of factors
d)
All of these
|
Arjun Singhania answered |
An increasing returns to scale occurs when the output increases by a larger proportion than the increase in inputs during the production process. For example, if input is increased by 3 times, but output increases by 3.75 times, then the firm or economy has experienced an increasing returns to scale.
A production function is defined as the relationship between ________.- a)The quantity of physical inputs and physical output of a firm
- b)Stock of inputs and stock of output
- c)Prices of inputs and output
- d)Price and supply of a firm.
Correct answer is option 'A'. Can you explain this answer?
A production function is defined as the relationship between ________.
a)
The quantity of physical inputs and physical output of a firm
b)
Stock of inputs and stock of output
c)
Prices of inputs and output
d)
Price and supply of a firm.
|
Kavita Joshi answered |
In simple words, production function refers to the functional relationship between the quantity of a good produced (output) and factors of production (inputs).
“The production function is purely a technical relation which connects factor inputs and output.” Prof. Koutsoyiannis
Defined production function as “the relation between a firm’s physical production (output) and the material factors of production (inputs).” Prof. Watson
In this way, production function reflects how much output we can expect if we have so much of labour and so much of capital as well as of labour etc. In other words, we can say that production function is an indicator of the physical relationship between the inputs and output of a firm.
The reason behind physical relationship is that money prices do not appear in it. However, here one thing that becomes most important to quote is that like demand function a production function is for a definite period.
It shows the flow of inputs resulting into a flow of output during some time.
In the short run, when the output of a firm increases, its average fixed cost :- a)increases.
- b)decreases.
- c)remains constant.
- d)first declines and then rises.
Correct answer is option 'B'. Can you explain this answer?
In the short run, when the output of a firm increases, its average fixed cost :
a)
increases.
b)
decreases.
c)
remains constant.
d)
first declines and then rises.
|
|
Mehul Saini answered |
Explanation:
Average fixed cost (AFC) is the fixed cost per unit of output. It is calculated by dividing the total fixed cost (TFC) by the total output (Q).
Formula: AFC = TFC/Q
Short Run: In the short run, at least one factor of production is fixed and cannot be changed. For example, a firm may have a fixed amount of capital such as a building, machinery or land.
When the output of a firm increases, the average fixed cost will decrease due to the spreading effect of fixed cost over a larger output.
Example:
Suppose a firm has a fixed cost of $1000 and produces 100 units of output, then AFC will be:
AFC = TFC/Q = $1000/100 = $10
If the firm increases its output to 200 units, then AFC will be:
AFC = TFC/Q = $1000/200 = $5
Therefore, as the output increases, the fixed cost is spread over a larger number of units, reducing the average fixed cost.
Conclusion:
In the short run, when the output of a firm increases, its average fixed cost decreases. Therefore, option 'B' is the correct answer.
Average fixed cost (AFC) is the fixed cost per unit of output. It is calculated by dividing the total fixed cost (TFC) by the total output (Q).
Formula: AFC = TFC/Q
Short Run: In the short run, at least one factor of production is fixed and cannot be changed. For example, a firm may have a fixed amount of capital such as a building, machinery or land.
When the output of a firm increases, the average fixed cost will decrease due to the spreading effect of fixed cost over a larger output.
Example:
Suppose a firm has a fixed cost of $1000 and produces 100 units of output, then AFC will be:
AFC = TFC/Q = $1000/100 = $10
If the firm increases its output to 200 units, then AFC will be:
AFC = TFC/Q = $1000/200 = $5
Therefore, as the output increases, the fixed cost is spread over a larger number of units, reducing the average fixed cost.
Conclusion:
In the short run, when the output of a firm increases, its average fixed cost decreases. Therefore, option 'B' is the correct answer.
If the LAC curve falls as output expands, this is due to ______________________.- a)Law of Diminishing Returns
- b)Diseconomies of Scale
- c)Law of Variable Proportions
- d)Economies of Scale
Correct answer is option 'D'. Can you explain this answer?
If the LAC curve falls as output expands, this is due to ______________________.
a)
Law of Diminishing Returns
b)
Diseconomies of Scale
c)
Law of Variable Proportions
d)
Economies of Scale
|
|
Srsps answered |
Long-run average cost is the cost per unit of output reasonable when all factors of production are variable. Long-Run Average cost is of 'U' shaped because of returns to scale. In the establishment, firms enjoy lots of economies to scale so its cost curve is downward sloping. Increasing income to scale applies when firms enjoy economies to scale. In the beginning, the factors of production are not exhausted.
Consider the following data 
The Average Variable Cost (AVC) for an output of 4 units will be:-- a)Rs. 20
- b)Rs. 30
- c)Rs. 25
- d)Rs. 26
Correct answer is option 'A'. Can you explain this answer?
Consider the following data
The Average Variable Cost (AVC) for an output of 4 units will be:-
a)
Rs. 20
b)
Rs. 30
c)
Rs. 25
d)
Rs. 26
|
|
Jay Vyas answered |
At 0 units of output TC is equalls TFC and TFC is remains constant so TVC at 4 units =TC-TFC TVC = 105-25=80 AVC = TVC/Q AVC = 80/4 = 20 HENCE option A is correct
Returns to scale will said to be in operation when quantity of: - a)All inputs are changed
- b)All inputs are changed in already established proportion
- c)All inputs are not changed
- d)One input is changed while quantity of all other inputs remain the same
Correct answer is 'B'. Can you explain this answer?
Returns to scale will said to be in operation when quantity of:
a)
All inputs are changed
b)
All inputs are changed in already established proportion
c)
All inputs are not changed
d)
One input is changed while quantity of all other inputs remain the same
|
|
Raghav Ghoshal answered |
Explanation:
Returns to scale is a concept that measures how the output of a production process changes when all inputs are changed. It refers to the relationship between the scale of production and the output produced.
Definition of Returns to Scale:
Returns to scale refers to the rate at which output increases when all inputs are increased by the same proportion.
Types of Returns to Scale:
There are three types of returns to scale:
1. Increasing returns to scale: When the output increases by more than the proportionate increase in all inputs.
2. Constant returns to scale: When the output increases by the same proportion as the increase in all inputs.
3. Decreasing returns to scale: When the output increases by less than the proportionate increase in all inputs.
Answer:
The correct answer is 'B'. When all inputs are changed in already established proportion, returns to scale will be in operation. This means that the rate at which output increases will be the same as the rate at which all inputs are increased.
Explanation of Other Options:
A) All inputs are changed: This option is not correct because it does not specify the proportion in which the inputs are changed.
C) All inputs are not changed: This option is not correct because returns to scale refers to the rate at which output changes when all inputs are changed.
D) One input is changed while the quantity of all other inputs remain the same: This option is not correct because returns to scale refers to the relationship between the scale of production and the output produced when all inputs are changed.
Returns to scale is a concept that measures how the output of a production process changes when all inputs are changed. It refers to the relationship between the scale of production and the output produced.
Definition of Returns to Scale:
Returns to scale refers to the rate at which output increases when all inputs are increased by the same proportion.
Types of Returns to Scale:
There are three types of returns to scale:
1. Increasing returns to scale: When the output increases by more than the proportionate increase in all inputs.
2. Constant returns to scale: When the output increases by the same proportion as the increase in all inputs.
3. Decreasing returns to scale: When the output increases by less than the proportionate increase in all inputs.
Answer:
The correct answer is 'B'. When all inputs are changed in already established proportion, returns to scale will be in operation. This means that the rate at which output increases will be the same as the rate at which all inputs are increased.
Explanation of Other Options:
A) All inputs are changed: This option is not correct because it does not specify the proportion in which the inputs are changed.
C) All inputs are not changed: This option is not correct because returns to scale refers to the rate at which output changes when all inputs are changed.
D) One input is changed while the quantity of all other inputs remain the same: This option is not correct because returns to scale refers to the relationship between the scale of production and the output produced when all inputs are changed.
Units 0 1 2 3 4
Total Cost 20 30 40 45 50
What will be the AFC at 4 units of output?- a)2
- b)3
- c)4
- d)5
Correct answer is option 'D'. Can you explain this answer?
Units 0 1 2 3 4
Total Cost 20 30 40 45 50
What will be the AFC at 4 units of output?
Total Cost 20 30 40 45 50
What will be the AFC at 4 units of output?
a)
2
b)
3
c)
4
d)
5
|
Ritika Iyer answered |
Calculation of AFC at 4 units of output:
- AFC (Average Fixed Cost) = Total Fixed Cost / Units of Output
- Total Fixed Cost = Total Cost - Total Variable Cost
- At 4 units of output, the total cost is 50 and given that the cost is the sum of fixed and variable costs, we need to determine the total fixed cost and variable cost.
- From the given data, we can see that the cost increases as the units of output increase, which means that the variable cost also increases.
- We can calculate the variable cost by subtracting the fixed cost from the total cost at any given level of output. For example, at 2 units of output, the variable cost is 30 - 20 = 10.
- To calculate the total fixed cost, we can subtract the variable cost from the total cost at the highest level of output (4 units): 50 - 45 = 5.
- Therefore, the AFC at 4 units of output is:
AFC = Total Fixed Cost / Units of Output
AFC = 5 / 4
AFC = 1.25 or 5/4
Therefore, the correct answer is option 'D' (5).
- AFC (Average Fixed Cost) = Total Fixed Cost / Units of Output
- Total Fixed Cost = Total Cost - Total Variable Cost
- At 4 units of output, the total cost is 50 and given that the cost is the sum of fixed and variable costs, we need to determine the total fixed cost and variable cost.
- From the given data, we can see that the cost increases as the units of output increase, which means that the variable cost also increases.
- We can calculate the variable cost by subtracting the fixed cost from the total cost at any given level of output. For example, at 2 units of output, the variable cost is 30 - 20 = 10.
- To calculate the total fixed cost, we can subtract the variable cost from the total cost at the highest level of output (4 units): 50 - 45 = 5.
- Therefore, the AFC at 4 units of output is:
AFC = Total Fixed Cost / Units of Output
AFC = 5 / 4
AFC = 1.25 or 5/4
Therefore, the correct answer is option 'D' (5).
Calculate total cost of 4 units:
- a)140
- b)120
- c)50
- d)40
Correct answer is option 'A'. Can you explain this answer?
Calculate total cost of 4 units:
a)
140
b)
120
c)
50
d)
40
|
Manasvi Khemani answered |
MC=30 change in quantity = 2 MC =change in total cost÷change in output30=change in total cost, ÷ 230*2=change in TC60= change in TCSo, TC of 4 unit =TC of initial unit +change in TC80+60=140
Suppose the total cost production of a commodity ‘x’ is Rs. 1, 25,000 out of which Implicit cost is Rs. 35,000 and normal profit is Rs. 25,000. What would be the explicit cost of commodity x?- a)Rs. 90,000
- b)Rs. 65,000
- c)Rs. 1, 00,000
- d)Rs. 60,000
Correct answer is option 'B'. Can you explain this answer?
Suppose the total cost production of a commodity ‘x’ is Rs. 1, 25,000 out of which Implicit cost is Rs. 35,000 and normal profit is Rs. 25,000. What would be the explicit cost of commodity x?
a)
Rs. 90,000
b)
Rs. 65,000
c)
Rs. 1, 00,000
d)
Rs. 60,000
|
|
Arka Tiwari answered |
125000-25000-35000 = 65000 = explicit cost.
Total cost = implicit cost + explicit cost.
Total cost = implicit cost + explicit cost.
Labour force wants more_______. - a)Facility
- b)Leisure
- c)Benefit
- d)All of the above
Correct answer is option 'B'. Can you explain this answer?
Labour force wants more_______.
a)
Facility
b)
Leisure
c)
Benefit
d)
All of the above
|
Jayant Mishra answered |
F leisure is a normal good—the demand for it increases as income increases—this increase in income tends to make workers supply less labour so they can "spend" the higher income on leisure (the "income effect").
Find AFC of 3 units.
- a)5
- b)10
- c)15
- d)25
Correct answer is option 'A'. Can you explain this answer?
Find AFC of 3 units.
a)
5
b)
10
c)
15
d)
25
|
|
Srsps answered |
AFC (Average Fixed Cost) is calculated by dividing the total fixed cost by the quantity of output produced.
Formula: AFC = Total Fixed Cost / Quantity of Output
Fixed costs are those costs that do not change with the level of output, such as rent, salaries, and equipment costs. These costs are incurred even if no output is produced. By dividing the total fixed cost by the quantity of output, you can determine the average fixed cost per unit of output.
Correct option is A.
Formula: AFC = Total Fixed Cost / Quantity of Output
Fixed costs are those costs that do not change with the level of output, such as rent, salaries, and equipment costs. These costs are incurred even if no output is produced. By dividing the total fixed cost by the quantity of output, you can determine the average fixed cost per unit of output.
Correct option is A.
Increase in all input leading to less than proportional increase in output is called ______:- a)Increasing returns to scale
- b)Decreasing returns to scale
- c)Constant returns to scale
- d)Both increasing and decreasing returns to scale
Correct answer is option 'B'. Can you explain this answer?
Increase in all input leading to less than proportional increase in output is called ______:
a)
Increasing returns to scale
b)
Decreasing returns to scale
c)
Constant returns to scale
d)
Both increasing and decreasing returns to scale
|
|
Arun Khanna answered |
It occurs if a given percentage increase in all inputs results in a smaller percentage increase in output. The most common explanation for decreasing Returns involves organization factors in very large firms. ... As a result, proportional increases in output require more than proportional increases in inputs.
The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?- a)Diseconomies of scale.
- b)Increasing returns.
- c)The firm being able to take advantage of large-scale production techniques as it expands its output.
- d)The increase in productivity that results from specialization.
Correct answer is option 'A'. Can you explain this answer?
The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the following?
a)
Diseconomies of scale.
b)
Increasing returns.
c)
The firm being able to take advantage of large-scale production techniques as it expands its output.
d)
The increase in productivity that results from specialization.
|
|
Lakshmi Kaur answered |
Explanation:
The long run average total cost (LRATC) curve shows the per-unit cost of producing a given level of output when the firm has the flexibility to adjust all of its inputs. The positively sloped part of the LRATC curve is called diseconomies of scale. It occurs when the firm's average total cost increases as the firm expands its output in the long run. This happens due to the following reasons:
1. Coordination problems: As the firm expands its output, it becomes more complex, and coordination problems arise, increasing the cost of production. This includes communication issues, delays in decision making, and conflicts between departments.
2. Management problems: As the firm expands, it becomes harder to manage efficiently, and the cost of management increases. This includes problems with delegation, supervision, and control.
3. Increasing input costs: As the firm expands, it may face increasing costs of inputs such as labor, raw materials, and energy, which increases the cost of production.
4. Diseconomies of specialization: As the firm becomes larger, it may become too specialized, and its employees may become less versatile, leading to a decline in productivity and an increase in costs.
Conclusion:
Therefore, the positively sloped part of the LRATC curve is due to the diseconomies of scale, which arise as the firm expands its output. These diseconomies can be due to coordination problems, management problems, increasing input costs, and diseconomies of specialization.
The long run average total cost (LRATC) curve shows the per-unit cost of producing a given level of output when the firm has the flexibility to adjust all of its inputs. The positively sloped part of the LRATC curve is called diseconomies of scale. It occurs when the firm's average total cost increases as the firm expands its output in the long run. This happens due to the following reasons:
1. Coordination problems: As the firm expands its output, it becomes more complex, and coordination problems arise, increasing the cost of production. This includes communication issues, delays in decision making, and conflicts between departments.
2. Management problems: As the firm expands, it becomes harder to manage efficiently, and the cost of management increases. This includes problems with delegation, supervision, and control.
3. Increasing input costs: As the firm expands, it may face increasing costs of inputs such as labor, raw materials, and energy, which increases the cost of production.
4. Diseconomies of specialization: As the firm becomes larger, it may become too specialized, and its employees may become less versatile, leading to a decline in productivity and an increase in costs.
Conclusion:
Therefore, the positively sloped part of the LRATC curve is due to the diseconomies of scale, which arise as the firm expands its output. These diseconomies can be due to coordination problems, management problems, increasing input costs, and diseconomies of specialization.
A firm producing 7 units of output has an average total cost of Rs. 150 and has to pay Rs. 350 to its fixed factors of production whether it produces or not. How much of the average total cost is made up of variable costs?- a)Rs. 200
- b)Rs. 50
- c)Rs. 300
- d)Rs. 100
Correct answer is option 'D'. Can you explain this answer?
A firm producing 7 units of output has an average total cost of Rs. 150 and has to pay Rs. 350 to its fixed factors of production whether it produces or not. How much of the average total cost is made up of variable costs?
a)
Rs. 200
b)
Rs. 50
c)
Rs. 300
d)
Rs. 100
|
|
Akshay Das answered |
Given:
Average total cost = Rs. 150
Fixed cost = Rs. 350
Output produced = 7 units
To find:
Variable cost component in average total cost
Solution:
Total cost = Average total cost * Output produced
Total cost = Rs. 150 * 7
Total cost = Rs. 1050
Variable cost = Total cost - Fixed cost
Variable cost = Rs. 1050 - Rs. 350
Variable cost = Rs. 700
Variable cost component in average total cost = Variable cost / Output produced
Variable cost component in average total cost = Rs. 700 / 7
Variable cost component in average total cost = Rs. 100
Therefore, the correct answer is option D, Rs. 100.
Average total cost = Rs. 150
Fixed cost = Rs. 350
Output produced = 7 units
To find:
Variable cost component in average total cost
Solution:
Total cost = Average total cost * Output produced
Total cost = Rs. 150 * 7
Total cost = Rs. 1050
Variable cost = Total cost - Fixed cost
Variable cost = Rs. 1050 - Rs. 350
Variable cost = Rs. 700
Variable cost component in average total cost = Variable cost / Output produced
Variable cost component in average total cost = Rs. 700 / 7
Variable cost component in average total cost = Rs. 100
Therefore, the correct answer is option D, Rs. 100.
AFC curve is: - a)Convex & downward sloping
- b)Concave & downward sloping
- c)Convex & upward sloping
- d)Concave & upward rising
Correct answer is option 'A'. Can you explain this answer?
AFC curve is:
a)
Convex & downward sloping
b)
Concave & downward sloping
c)
Convex & upward sloping
d)
Concave & upward rising
|
Freedom Institute answered |
The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC. Variable returns to scale explains why the other cost curves are U-shaped.
A firm producers 10 units of a commodity at an average total cost of Rs. 200 and with a fixed cost of Rs. 500. Find out the component of average variable cost in the total cost:- a)Rs. 300
- b)Rs. 200
- c)Rs. 150
- d)Rs. 100
Correct answer is 'C'. Can you explain this answer?
A firm producers 10 units of a commodity at an average total cost of Rs. 200 and with a fixed cost of Rs. 500. Find out the component of average variable cost in the total cost:
a)
Rs. 300
b)
Rs. 200
c)
Rs. 150
d)
Rs. 100
|
|
Ritika Iyer answered |
Given information:
- Number of units produced = 10
- Average total cost = Rs. 200
- Fixed cost = Rs. 500
To find out the component of average variable cost in the total cost, we need to calculate the average variable cost first.
Average variable cost (AVC) = Total variable cost / Number of units produced
Total cost = Total fixed cost + Total variable cost
Average total cost (ATC) = Total cost / Number of units produced
Since we know the value of ATC and fixed cost, we can calculate the value of total variable cost.
Total cost = Total fixed cost + Total variable cost
ATC * Number of units produced = Fixed cost + Total variable cost
Rs. 200 * 10 = Rs. 500 + Total variable cost
Total variable cost = Rs. 1500 - Rs. 500
Total variable cost = Rs. 1000
Now, we can calculate the value of AVC.
AVC = Total variable cost / Number of units produced
AVC = Rs. 1000 / 10
AVC = Rs. 100
Therefore, the component of average variable cost in the total cost is Rs. 150 (ATC - AVC).
Answer: Option (c) Rs. 150.
- Number of units produced = 10
- Average total cost = Rs. 200
- Fixed cost = Rs. 500
To find out the component of average variable cost in the total cost, we need to calculate the average variable cost first.
Average variable cost (AVC) = Total variable cost / Number of units produced
Total cost = Total fixed cost + Total variable cost
Average total cost (ATC) = Total cost / Number of units produced
Since we know the value of ATC and fixed cost, we can calculate the value of total variable cost.
Total cost = Total fixed cost + Total variable cost
ATC * Number of units produced = Fixed cost + Total variable cost
Rs. 200 * 10 = Rs. 500 + Total variable cost
Total variable cost = Rs. 1500 - Rs. 500
Total variable cost = Rs. 1000
Now, we can calculate the value of AVC.
AVC = Total variable cost / Number of units produced
AVC = Rs. 1000 / 10
AVC = Rs. 100
Therefore, the component of average variable cost in the total cost is Rs. 150 (ATC - AVC).
Answer: Option (c) Rs. 150.
The Law of Diminishing Returns is applicable in _________.- a)Only manufacturing industries
- b)Only Agriculture
- c)Neither in Agriculture nor in industries
- d)All Economic activities after a point
Correct answer is option 'D'. Can you explain this answer?
The Law of Diminishing Returns is applicable in _________.
a)
Only manufacturing industries
b)
Only Agriculture
c)
Neither in Agriculture nor in industries
d)
All Economic activities after a point
|
Nandini Iyer answered |
Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.
A firm’s average fixed cost is Rs. 40 at 12 units. What will be the average fixed cost at 8 units:- a)Rs. 60
- b)Rs. 70
- c)Rs. 90
- d)Rs. 80
Correct answer is option 'A'. Can you explain this answer?
A firm’s average fixed cost is Rs. 40 at 12 units. What will be the average fixed cost at 8 units:
a)
Rs. 60
b)
Rs. 70
c)
Rs. 90
d)
Rs. 80
|
|
Subhankar Sen answered |
Is an organization that provides goods or services to customers in exchange for payment. It can be a sole proprietorship, partnership, corporation, or other legal entity. Firms are typically created to generate profits for their owners or shareholders, but they can also be non-profit organizations that operate for the benefit of society. Firms can operate in a variety of industries, such as manufacturing, technology, healthcare, finance, and retail. They can be small and local or large and multinational, with operations in multiple countries.
In the first stage of law of variable proportions, total product increases at the ______
- a)Decreasing rate
- b)Increasing rate
- c)Constant rate
- d)Both A And B
Correct answer is option 'B'. Can you explain this answer?
In the first stage of law of variable proportions, total product increases at the ______
a)
Decreasing rate
b)
Increasing rate
c)
Constant rate
d)
Both A And B
|
Janhavi Basu answered |
Law of Variable Proportions:
The law of variable proportions is a fundamental principle of economics that explains the relationship between the amount of inputs used in production and the resulting output. It states that as one input is increased while all others are held constant, the output will increase, but only up to a certain point. At this point, the law of diminishing returns takes effect, and the output will begin to increase at a decreasing rate.
First Stage of Law of Variable Proportions:
The first stage of the law of variable proportions is characterized by an increase in total product as more units of the variable input are employed while the fixed inputs are held constant. This stage is also known as the stage of increasing returns or the stage of expansion.
Total Product:
Total product refers to the total output produced by a firm using a given combination of inputs. It is the sum of all the units of output produced by the firm.
Total Product and Increasing Rate:
In the first stage of the law of variable proportions, the total product increases at an increasing rate. This means that as the firm adds more units of the variable input, the total output increases at an accelerating rate. This is because the additional units of the variable input are being used more efficiently, and the firm is able to take advantage of economies of scale.
Conclusion:
In conclusion, the total product increases at an increasing rate in the first stage of the law of variable proportions. This is due to the efficient use of the additional units of the variable input, resulting in economies of scale. However, as more and more units of the variable input are added, the law of diminishing returns takes effect, and the total product begins to increase at a decreasing rate.
The law of variable proportions is a fundamental principle of economics that explains the relationship between the amount of inputs used in production and the resulting output. It states that as one input is increased while all others are held constant, the output will increase, but only up to a certain point. At this point, the law of diminishing returns takes effect, and the output will begin to increase at a decreasing rate.
First Stage of Law of Variable Proportions:
The first stage of the law of variable proportions is characterized by an increase in total product as more units of the variable input are employed while the fixed inputs are held constant. This stage is also known as the stage of increasing returns or the stage of expansion.
Total Product:
Total product refers to the total output produced by a firm using a given combination of inputs. It is the sum of all the units of output produced by the firm.
Total Product and Increasing Rate:
In the first stage of the law of variable proportions, the total product increases at an increasing rate. This means that as the firm adds more units of the variable input, the total output increases at an accelerating rate. This is because the additional units of the variable input are being used more efficiently, and the firm is able to take advantage of economies of scale.
Conclusion:
In conclusion, the total product increases at an increasing rate in the first stage of the law of variable proportions. This is due to the efficient use of the additional units of the variable input, resulting in economies of scale. However, as more and more units of the variable input are added, the law of diminishing returns takes effect, and the total product begins to increase at a decreasing rate.
The Average fixed cost for producing on output of 6 units of a product by a firm is Rs. 30. The same cost for producing an output of 4 units will be Rs. ______.- a)50
- b)45
- c)25
- d)20
Correct answer is option 'B'. Can you explain this answer?
The Average fixed cost for producing on output of 6 units of a product by a firm is Rs. 30. The same cost for producing an output of 4 units will be Rs. ______.
a)
50
b)
45
c)
25
d)
20
|
|
Rajveer Yadav answered |
Given, the average fixed cost for producing 6 units of a product is Rs. 30.
We can use the formula for calculating average fixed cost:
Average fixed cost = Total fixed cost / Quantity
Let the total fixed cost be 'F' for producing 6 units of the product.
30 = F / 6
F = 180
So, the total fixed cost for producing 6 units is Rs. 180.
Now, we need to find the average fixed cost for producing 4 units.
Let the total fixed cost for producing 4 units be 'C'.
We know that the average fixed cost remains the same for different quantities of output.
So, we can use the same formula:
Average fixed cost = C / 4
But we know that the average fixed cost is Rs. 30.
So, we can write:
30 = C / 4
C = 120
Therefore, the total fixed cost for producing 4 units of the product is Rs. 120.
Now, we can calculate the average fixed cost for producing 4 units:
Average fixed cost = 120 / 4 = Rs. 30
Therefore, the answer is option B) 45.
We can use the formula for calculating average fixed cost:
Average fixed cost = Total fixed cost / Quantity
Let the total fixed cost be 'F' for producing 6 units of the product.
30 = F / 6
F = 180
So, the total fixed cost for producing 6 units is Rs. 180.
Now, we need to find the average fixed cost for producing 4 units.
Let the total fixed cost for producing 4 units be 'C'.
We know that the average fixed cost remains the same for different quantities of output.
So, we can use the same formula:
Average fixed cost = C / 4
But we know that the average fixed cost is Rs. 30.
So, we can write:
30 = C / 4
C = 120
Therefore, the total fixed cost for producing 4 units of the product is Rs. 120.
Now, we can calculate the average fixed cost for producing 4 units:
Average fixed cost = 120 / 4 = Rs. 30
Therefore, the answer is option B) 45.
The marginal, average, and total product curves encountered by the firm producing in the short run exhibit all of the following relationships except:- a)when total product is rising, average and marginal product may be either rising or falling.
- b)when marginal product is negative, total product and average product are falling.
- c)when average product is at a maximum, marginal product equals average product, and total product is rising.
- d)when marginal product is at a maximum, average product equals marginal product, and total product is rising.
Correct answer is option 'D'. Can you explain this answer?
The marginal, average, and total product curves encountered by the firm producing in the short run exhibit all of the following relationships except:
a)
when total product is rising, average and marginal product may be either rising or falling.
b)
when marginal product is negative, total product and average product are falling.
c)
when average product is at a maximum, marginal product equals average product, and total product is rising.
d)
when marginal product is at a maximum, average product equals marginal product, and total product is rising.
|
Anand Dasgupta answered |
Explanation:
Marginal product (MP), average product (AP), and total product (TP) are important concepts in the theory of production. The relationship between these three curves can reveal important information about the efficiency of production.
a) When total product is rising, average and marginal product may be either rising or falling:
- Total product (TP) is the total output of a firm, which increases as more inputs are added.
- Average product (AP) is the output per unit of input, which may increase initially as more inputs are added, but eventually reaches a maximum and then declines.
- Marginal product (MP) is the additional output produced by adding one more unit of input, which may increase initially as more inputs are added, but eventually reaches a maximum and then declines.
Therefore, when TP is rising, AP may be rising or falling, depending on whether the additional inputs are adding more or less than the average output per unit of input. Similarly, MP may be rising or falling, depending on whether the additional input is adding more or less than the previous unit.
b) When marginal product is negative, total product and average product are falling:
- When MP is negative, it means that the additional input is decreasing the overall output of the firm, which leads to a decline in TP.
- Since AP is calculated as TP divided by the number of inputs, it will also decline when TP is falling.
c) When average product is at a maximum, marginal product equals average product, and total product is rising:
- AP reaches a maximum when the additional input is adding the most output per unit of input, which means that MP equals AP at this point.
- This also means that the firm is producing at the most efficient level, and TP is rising as more inputs are added.
d) When marginal product is at a maximum, average product equals marginal product, and total product is rising:
- This statement is incorrect because it implies that MP is at a maximum when AP is equal to MP, which is not true.
- MP reaches a maximum when the additional input is adding the most output, which may occur at a different point than when AP is at a maximum.
- However, when MP is at a maximum, it does indicate that the firm is producing at the most efficient level, and TP is rising as more inputs are added.
Therefore, the correct answer is option D, as it does not accurately describe the relationship between MP, AP, and TP.
Marginal product (MP), average product (AP), and total product (TP) are important concepts in the theory of production. The relationship between these three curves can reveal important information about the efficiency of production.
a) When total product is rising, average and marginal product may be either rising or falling:
- Total product (TP) is the total output of a firm, which increases as more inputs are added.
- Average product (AP) is the output per unit of input, which may increase initially as more inputs are added, but eventually reaches a maximum and then declines.
- Marginal product (MP) is the additional output produced by adding one more unit of input, which may increase initially as more inputs are added, but eventually reaches a maximum and then declines.
Therefore, when TP is rising, AP may be rising or falling, depending on whether the additional inputs are adding more or less than the average output per unit of input. Similarly, MP may be rising or falling, depending on whether the additional input is adding more or less than the previous unit.
b) When marginal product is negative, total product and average product are falling:
- When MP is negative, it means that the additional input is decreasing the overall output of the firm, which leads to a decline in TP.
- Since AP is calculated as TP divided by the number of inputs, it will also decline when TP is falling.
c) When average product is at a maximum, marginal product equals average product, and total product is rising:
- AP reaches a maximum when the additional input is adding the most output per unit of input, which means that MP equals AP at this point.
- This also means that the firm is producing at the most efficient level, and TP is rising as more inputs are added.
d) When marginal product is at a maximum, average product equals marginal product, and total product is rising:
- This statement is incorrect because it implies that MP is at a maximum when AP is equal to MP, which is not true.
- MP reaches a maximum when the additional input is adding the most output, which may occur at a different point than when AP is at a maximum.
- However, when MP is at a maximum, it does indicate that the firm is producing at the most efficient level, and TP is rising as more inputs are added.
Therefore, the correct answer is option D, as it does not accurately describe the relationship between MP, AP, and TP.
Q. Diminishing marginal returns start to occur between units : - a)2 and 3.
- b)3 and 4.
- c)4 and 5.
- d)5 and 6.
Correct answer is option 'C'. Can you explain this answer?
Q. Diminishing marginal returns start to occur between units :
a)
2 and 3.
b)
3 and 4.
c)
4 and 5.
d)
5 and 6.
|
Babita Suyal answered |
As after 4 and 5 it starts increasing that's why at c option is correct
Which curve is never U-shaped?- a)ATC curve
- b)AVC curve
- c)AFC curve
- d)MC curve
Correct answer is option 'C'. Can you explain this answer?
Which curve is never U-shaped?
a)
ATC curve
b)
AVC curve
c)
AFC curve
d)
MC curve
|
|
Mihir Banerjee answered |
Explanation:
The U-shaped curve is a characteristic of the average variable cost (AVC) and average total cost (ATC) curves. However, the average fixed cost (AFC) and marginal cost (MC) curves do not exhibit a U-shape.
Average Fixed Cost (AFC) Curve:
The average fixed cost (AFC) curve is a rectangular hyperbola. It slopes downwards to the right but never touches the horizontal axis. This is because fixed costs remain constant, no matter what the level of output is. Therefore, as output increases, the fixed cost per unit decreases. AFC is calculated by dividing the total fixed cost by the level of output.
AFC = Total Fixed Cost / Quantity
As the level of output increases, the denominator increases, and hence the AFC decreases. Since the curve slopes downwards to the right, it never exhibits a U-shape.
Marginal Cost (MC) Curve:
The marginal cost (MC) curve is the slope of the total cost (TC) curve. It shows the additional cost incurred in producing one more unit of output. MC is calculated by dividing the change in total cost by the change in output.
MC = Change in Total Cost / Change in Quantity
The MC curve is U-shaped if the marginal product of labor (MPL) curve is diminishing. This is because the additional output produced by each additional unit of labor decreases, leading to an increase in marginal cost. However, if the MPL curve is increasing or constant, the MC curve is not U-shaped.
Conclusion:
The AFC and MC curves do not exhibit a U-shape, while the ATC and AVC curves do. This is because fixed costs do not change with the level of output, and the MC curve is not always affected by diminishing marginal returns.
The U-shaped curve is a characteristic of the average variable cost (AVC) and average total cost (ATC) curves. However, the average fixed cost (AFC) and marginal cost (MC) curves do not exhibit a U-shape.
Average Fixed Cost (AFC) Curve:
The average fixed cost (AFC) curve is a rectangular hyperbola. It slopes downwards to the right but never touches the horizontal axis. This is because fixed costs remain constant, no matter what the level of output is. Therefore, as output increases, the fixed cost per unit decreases. AFC is calculated by dividing the total fixed cost by the level of output.
AFC = Total Fixed Cost / Quantity
As the level of output increases, the denominator increases, and hence the AFC decreases. Since the curve slopes downwards to the right, it never exhibits a U-shape.
Marginal Cost (MC) Curve:
The marginal cost (MC) curve is the slope of the total cost (TC) curve. It shows the additional cost incurred in producing one more unit of output. MC is calculated by dividing the change in total cost by the change in output.
MC = Change in Total Cost / Change in Quantity
The MC curve is U-shaped if the marginal product of labor (MPL) curve is diminishing. This is because the additional output produced by each additional unit of labor decreases, leading to an increase in marginal cost. However, if the MPL curve is increasing or constant, the MC curve is not U-shaped.
Conclusion:
The AFC and MC curves do not exhibit a U-shape, while the ATC and AVC curves do. This is because fixed costs do not change with the level of output, and the MC curve is not always affected by diminishing marginal returns.
At the point of inflexion, the marginal product is:- a)Increasing
- b)Decreasing
- c)Maximum
- d)Negative
Correct answer is option 'C'. Can you explain this answer?
At the point of inflexion, the marginal product is:
a)
Increasing
b)
Decreasing
c)
Maximum
d)
Negative
|
|
Jyoti Nair answered |
Marginal product and inflexion point:
Marginal product refers to the additional output produced by adding one more unit of input. In other words, it is the increase in production resulting from the addition of one more unit of input.
Inflexion point refers to the point on a graph where the curve changes from being concave upwards to concave downwards or vice versa. It is the point where the second derivative of the function changes sign.
Marginal product and inflexion point are related because the marginal product curve is the first derivative of the production function, and the inflexion point is where the second derivative of the production function changes sign.
Answer:
At the point of inflexion, the marginal product is maximum. This is because the point of inflexion is where the marginal product curve changes from increasing to decreasing. Before the inflexion point, the marginal product is increasing, and after the inflexion point, it is decreasing.
Therefore, the maximum point of the marginal product curve corresponds to the inflexion point of the production function. At this point, the firm is producing output most efficiently, and any further increase in input will result in a decrease in marginal product.
In summary, the inflexion point of the production function is where the marginal product is maximum. This is because it is the point where the marginal product curve changes from increasing to decreasing.
Marginal product refers to the additional output produced by adding one more unit of input. In other words, it is the increase in production resulting from the addition of one more unit of input.
Inflexion point refers to the point on a graph where the curve changes from being concave upwards to concave downwards or vice versa. It is the point where the second derivative of the function changes sign.
Marginal product and inflexion point are related because the marginal product curve is the first derivative of the production function, and the inflexion point is where the second derivative of the production function changes sign.
Answer:
At the point of inflexion, the marginal product is maximum. This is because the point of inflexion is where the marginal product curve changes from increasing to decreasing. Before the inflexion point, the marginal product is increasing, and after the inflexion point, it is decreasing.
Therefore, the maximum point of the marginal product curve corresponds to the inflexion point of the production function. At this point, the firm is producing output most efficiently, and any further increase in input will result in a decrease in marginal product.
In summary, the inflexion point of the production function is where the marginal product is maximum. This is because it is the point where the marginal product curve changes from increasing to decreasing.
External Economies of scale are obtained by - a)A firm
- b)A group of firm
- c)Small Production
- d)Society
Correct answer is option 'B'. Can you explain this answer?
External Economies of scale are obtained by
a)
A firm
b)
A group of firm
c)
Small Production
d)
Society
|
|
Maheshwar Datta answered |
External Economies of Scale for Group of Firms
External economies of scale refer to the benefits that a group of firms operating in the same industry or geographical area can enjoy as a result of their collective actions. These benefits arise from the external environment in which the firms operate and are not directly under the control of any individual firm. The following are some of the ways in which a group of firms can benefit from external economies of scale:
1. Shared Infrastructure: When a group of firms operate in the same industrial park or geographical area, they can share the same infrastructure such as roads, water supply, electricity, and communication networks. This reduces the cost of infrastructure for each firm, resulting in lower production costs.
2. Skilled Labor: A group of firms can benefit from external economies of scale by sharing skilled labor. For example, if a group of firms operate in the same area, they can attract a pool of skilled labor to the area, which can benefit all the firms in the area.
3. Knowledge Sharing: A group of firms can share knowledge and information, which can lead to innovation and increased competitiveness. For example, firms can collaborate on research and development projects, share marketing strategies, and exchange information on production processes.
4. Access to Suppliers: A group of firms can benefit from external economies of scale by having access to a larger pool of suppliers. This can result in lower input costs and better quality inputs.
5. Improved Infrastructure: A group of firms can benefit from external economies of scale by improving the infrastructure in the area. For example, if a group of firms invests in the construction of a port, all the firms in the area can benefit from the improved transportation infrastructure.
Conclusion
External economies of scale can benefit a group of firms in many ways. By sharing infrastructure, labor, knowledge, suppliers, and improving the infrastructure in the area, a group of firms can reduce their production costs, increase their competitiveness, and achieve economies of scale that would not be possible for individual firms.
External economies of scale refer to the benefits that a group of firms operating in the same industry or geographical area can enjoy as a result of their collective actions. These benefits arise from the external environment in which the firms operate and are not directly under the control of any individual firm. The following are some of the ways in which a group of firms can benefit from external economies of scale:
1. Shared Infrastructure: When a group of firms operate in the same industrial park or geographical area, they can share the same infrastructure such as roads, water supply, electricity, and communication networks. This reduces the cost of infrastructure for each firm, resulting in lower production costs.
2. Skilled Labor: A group of firms can benefit from external economies of scale by sharing skilled labor. For example, if a group of firms operate in the same area, they can attract a pool of skilled labor to the area, which can benefit all the firms in the area.
3. Knowledge Sharing: A group of firms can share knowledge and information, which can lead to innovation and increased competitiveness. For example, firms can collaborate on research and development projects, share marketing strategies, and exchange information on production processes.
4. Access to Suppliers: A group of firms can benefit from external economies of scale by having access to a larger pool of suppliers. This can result in lower input costs and better quality inputs.
5. Improved Infrastructure: A group of firms can benefit from external economies of scale by improving the infrastructure in the area. For example, if a group of firms invests in the construction of a port, all the firms in the area can benefit from the improved transportation infrastructure.
Conclusion
External economies of scale can benefit a group of firms in many ways. By sharing infrastructure, labor, knowledge, suppliers, and improving the infrastructure in the area, a group of firms can reduce their production costs, increase their competitiveness, and achieve economies of scale that would not be possible for individual firms.
What will be the TVC if we produce 2 units?
Units 0 1 2
TC 20 37 50- a)15
- b)05
- c)17
- d)30
Correct answer is option 'D'. Can you explain this answer?
What will be the TVC if we produce 2 units?
Units 0 1 2
TC 20 37 50
Units 0 1 2
TC 20 37 50
a)
15
b)
05
c)
17
d)
30
|
|
Ruchi Mishra answered |
To calculate the TVC (total variable cost) for producing 2 units, we need to subtract the total cost of producing 1 unit (TC for 1 unit) from the total cost of producing 2 units (TC for 2 units).
TC for 1 unit = 37 - 20 = 17 (subtracting the TC for 0 units from the TC for 1 unit)
TC for 2 units = 50 - 20 = 30 (subtracting the TC for 0 units from the TC for 2 units)
TVC for producing 2 units = TC for 2 units - TC for 1 unit = 30 - 17 = 13
Therefore, none of the given options (a, b, c) are correct, and the correct answer is option 'D' (30).
TC for 1 unit = 37 - 20 = 17 (subtracting the TC for 0 units from the TC for 1 unit)
TC for 2 units = 50 - 20 = 30 (subtracting the TC for 0 units from the TC for 2 units)
TVC for producing 2 units = TC for 2 units - TC for 1 unit = 30 - 17 = 13
Therefore, none of the given options (a, b, c) are correct, and the correct answer is option 'D' (30).
Identify the correct statement :- a)The average product is at its maximum when marginal product is equal to average product.
- b)The law of increasing returns to scale relates to the effect of changes in factor proportions.
- c)Economies of scale arise only because of indivisibilities of factor proportions.
- d)Internal economies of scale can accrue only to the exporting sector.
Correct answer is option 'A'. Can you explain this answer?
Identify the correct statement :
a)
The average product is at its maximum when marginal product is equal to average product.
b)
The law of increasing returns to scale relates to the effect of changes in factor proportions.
c)
Economies of scale arise only because of indivisibilities of factor proportions.
d)
Internal economies of scale can accrue only to the exporting sector.
|
|
Aditya Das answered |
Explanation:
The correct statement is option 'A': The average product is at its maximum when marginal product is equal to average product.
Average Product and Marginal Product:
- Average product refers to the output per unit of input, i.e., the total output divided by the total input.
- Marginal product refers to the additional output produced by using an additional unit of input.
Relationship between Average Product and Marginal Product:
- When marginal product is greater than average product, the average product increases.
- When marginal product is less than average product, the average product decreases.
- When marginal product is equal to average product, the average product is at its maximum.
Example:
Suppose a firm produces 100 units of output using 10 units of input. The average product is 10 units per input. If the firm uses one more unit of input and produces 12 units of output, the marginal product is 2 units. Now, the average product is (100+12)/(10+1) = 10.18 units per input. If the firm uses one more unit of input and produces 13 units of output, the marginal product is 1 unit. Now, the average product is (100+12+13)/(10+1+1) = 10.42 units per input. The average product is increasing as long as the marginal product is greater than the average product, and it reaches its maximum when the marginal product is equal to the average product.
Conclusion:
Hence, the correct statement is that the average product is at its maximum when marginal product is equal to average product.
The correct statement is option 'A': The average product is at its maximum when marginal product is equal to average product.
Average Product and Marginal Product:
- Average product refers to the output per unit of input, i.e., the total output divided by the total input.
- Marginal product refers to the additional output produced by using an additional unit of input.
Relationship between Average Product and Marginal Product:
- When marginal product is greater than average product, the average product increases.
- When marginal product is less than average product, the average product decreases.
- When marginal product is equal to average product, the average product is at its maximum.
Example:
Suppose a firm produces 100 units of output using 10 units of input. The average product is 10 units per input. If the firm uses one more unit of input and produces 12 units of output, the marginal product is 2 units. Now, the average product is (100+12)/(10+1) = 10.18 units per input. If the firm uses one more unit of input and produces 13 units of output, the marginal product is 1 unit. Now, the average product is (100+12+13)/(10+1+1) = 10.42 units per input. The average product is increasing as long as the marginal product is greater than the average product, and it reaches its maximum when the marginal product is equal to the average product.
Conclusion:
Hence, the correct statement is that the average product is at its maximum when marginal product is equal to average product.
Diminishing returns occur :- a)when units of a variable input are added to a fixed input and total product falls.
- b)when units of a variable input are added to a fixed input and marginal product falls.
- c)when the size of the plant is increased in the long run.
- d)when the quantity of the fixed input is increased and returns to the variable input falls.
Correct answer is option 'B'. Can you explain this answer?
Diminishing returns occur :
a)
when units of a variable input are added to a fixed input and total product falls.
b)
when units of a variable input are added to a fixed input and marginal product falls.
c)
when the size of the plant is increased in the long run.
d)
when the quantity of the fixed input is increased and returns to the variable input falls.
|
|
Mrinalini Iyer answered |
Diminishing returns occur when units of a variable input are added to a fixed input and marginal product falls.
Diminishing returns is an economic concept that refers to a situation where the increase in the production of a good or service starts to decrease after a certain point. In other words, it is the point at which the additional input of a variable factor of production results in a less-than-proportional increase in output.
Explanation:
To understand why diminishing returns occur, let's break down the answer into the following sections:
1. Variable and Fixed Inputs: In the short run, a firm has both variable and fixed inputs. Variable inputs are those that can be easily changed in the short run, such as labor, while fixed inputs are those that cannot be changed, such as capital or machinery.
2. Total Product and Marginal Product: Total product refers to the total amount of output produced by a firm using a specific combination of inputs. Marginal product, on the other hand, refers to the additional output produced by using one more unit of a variable input while keeping other inputs constant.
3. Relationship between Marginal Product and Total Product: Initially, as more units of a variable input are added to a fixed input, the total product increases at an increasing rate. This is known as the law of increasing returns. However, after a certain point, the total product starts to increase at a decreasing rate. This is where diminishing returns come into play.
4. Diminishing Marginal Returns: Diminishing returns occur when the marginal product of a variable input starts to decline. In other words, each additional unit of the variable input leads to a smaller increase in output. This happens because the fixed input becomes a constraint on the production process. For example, if a firm has a fixed amount of machinery, adding more workers to operate the machinery may lead to overcrowding or inefficiency, resulting in a decrease in marginal product.
5. Illustration: Let's consider an example of a bakery. Initially, adding more bakers to the existing equipment may increase the total number of loaves of bread produced. However, at some point, adding more bakers may lead to a crowded workspace, reducing the efficiency and resulting in a smaller increase in the total number of loaves produced. This is an example of diminishing marginal returns.
In conclusion, diminishing returns occur when the addition of units of a variable input to a fixed input leads to a decrease in the marginal product. This is a crucial concept in economics as it helps firms understand the optimal level of input usage for maximizing output and minimizing costs.
Diminishing returns is an economic concept that refers to a situation where the increase in the production of a good or service starts to decrease after a certain point. In other words, it is the point at which the additional input of a variable factor of production results in a less-than-proportional increase in output.
Explanation:
To understand why diminishing returns occur, let's break down the answer into the following sections:
1. Variable and Fixed Inputs: In the short run, a firm has both variable and fixed inputs. Variable inputs are those that can be easily changed in the short run, such as labor, while fixed inputs are those that cannot be changed, such as capital or machinery.
2. Total Product and Marginal Product: Total product refers to the total amount of output produced by a firm using a specific combination of inputs. Marginal product, on the other hand, refers to the additional output produced by using one more unit of a variable input while keeping other inputs constant.
3. Relationship between Marginal Product and Total Product: Initially, as more units of a variable input are added to a fixed input, the total product increases at an increasing rate. This is known as the law of increasing returns. However, after a certain point, the total product starts to increase at a decreasing rate. This is where diminishing returns come into play.
4. Diminishing Marginal Returns: Diminishing returns occur when the marginal product of a variable input starts to decline. In other words, each additional unit of the variable input leads to a smaller increase in output. This happens because the fixed input becomes a constraint on the production process. For example, if a firm has a fixed amount of machinery, adding more workers to operate the machinery may lead to overcrowding or inefficiency, resulting in a decrease in marginal product.
5. Illustration: Let's consider an example of a bakery. Initially, adding more bakers to the existing equipment may increase the total number of loaves of bread produced. However, at some point, adding more bakers may lead to a crowded workspace, reducing the efficiency and resulting in a smaller increase in the total number of loaves produced. This is an example of diminishing marginal returns.
In conclusion, diminishing returns occur when the addition of units of a variable input to a fixed input leads to a decrease in the marginal product. This is a crucial concept in economics as it helps firms understand the optimal level of input usage for maximizing output and minimizing costs.
With fixed cost of Rs. 400, a firm has an average total cost of Rs. 3 and an average variable cost of Rs. 2.50. Its output is _________.- a)200 units
- b)400 units
- c)800 units
- d)1600 units
Correct answer is option 'C'. Can you explain this answer?
With fixed cost of Rs. 400, a firm has an average total cost of Rs. 3 and an average variable cost of Rs. 2.50. Its output is _________.
a)
200 units
b)
400 units
c)
800 units
d)
1600 units
|
|
Divya Dasgupta answered |
Given information:
- Fixed cost (FC) = Rs. 400
- Average total cost (ATC) = Rs. 3
- Average variable cost (AVC) = Rs. 2.50
To find: Output level
Let's break down the problem step by step to find the output level.
1. Calculate the total cost (TC):
- TC = ATC * Output
- FC + VC = ATC * Output
- Rs. 400 + VC = Rs. 3 * Output
2. Calculate the variable cost (VC):
- VC = AVC * Output
- Rs. 2.50 * Output
3. Substitute the value of VC in the TC equation:
- Rs. 400 + Rs. 2.50 * Output = Rs. 3 * Output
4. Simplify the equation to solve for Output:
- Rs. 400 = Rs. 0.50 * Output
- Output = Rs. 400 / Rs. 0.50
- Output = 800 units
Therefore, the firm's output level is 800 units.
- Fixed cost (FC) = Rs. 400
- Average total cost (ATC) = Rs. 3
- Average variable cost (AVC) = Rs. 2.50
To find: Output level
Let's break down the problem step by step to find the output level.
1. Calculate the total cost (TC):
- TC = ATC * Output
- FC + VC = ATC * Output
- Rs. 400 + VC = Rs. 3 * Output
2. Calculate the variable cost (VC):
- VC = AVC * Output
- Rs. 2.50 * Output
3. Substitute the value of VC in the TC equation:
- Rs. 400 + Rs. 2.50 * Output = Rs. 3 * Output
4. Simplify the equation to solve for Output:
- Rs. 400 = Rs. 0.50 * Output
- Output = Rs. 400 / Rs. 0.50
- Output = 800 units
Therefore, the firm's output level is 800 units.
As output increases, average fixed cost: - a)Remains constant
- b)Starts falling
- c)Start rising
- d)None
Correct answer is option 'B'. Can you explain this answer?
As output increases, average fixed cost:
a)
Remains constant
b)
Starts falling
c)
Start rising
d)
None
|
|
Geetika Basak answered |
Explanation:
Average fixed cost (AFC) is the total fixed cost divided by the quantity produced. As output increases, the total fixed cost remains fixed, but the average fixed cost decreases.
Reasons:
There are several reasons why average fixed cost decreases as output increases:
1. Spread Over a Larger Output: Fixed costs are spread over a larger number of units as output increases. This means that the average fixed cost per unit decreases.
2. Economies of Scale: As a firm produces more output, it may benefit from economies of scale. This means that the cost per unit of output decreases as output increases.
3. Specialization of Labor: As output increases, the firm may be able to specialize the work of its employees more effectively. This can lead to higher productivity and lower costs per unit of output.
Graphical Representation:
The graphical representation of the AFC curve is a rectangular hyperbola, which means that as output increases, AFC approaches zero but never reaches it.
Conclusion:
In conclusion, as output increases, average fixed cost decreases due to spreading fixed costs over a larger output, benefiting from economies of scale, and specialization of labor.
Average fixed cost (AFC) is the total fixed cost divided by the quantity produced. As output increases, the total fixed cost remains fixed, but the average fixed cost decreases.
Reasons:
There are several reasons why average fixed cost decreases as output increases:
1. Spread Over a Larger Output: Fixed costs are spread over a larger number of units as output increases. This means that the average fixed cost per unit decreases.
2. Economies of Scale: As a firm produces more output, it may benefit from economies of scale. This means that the cost per unit of output decreases as output increases.
3. Specialization of Labor: As output increases, the firm may be able to specialize the work of its employees more effectively. This can lead to higher productivity and lower costs per unit of output.
Graphical Representation:
The graphical representation of the AFC curve is a rectangular hyperbola, which means that as output increases, AFC approaches zero but never reaches it.
Conclusion:
In conclusion, as output increases, average fixed cost decreases due to spreading fixed costs over a larger output, benefiting from economies of scale, and specialization of labor.
Which one of the following is correct?- a)AFC=AVC+ATC
- b)ATC=AFC-AVC
- c)AVC=AFC+ATC
- d)AFC=ATC-AVC
Correct answer is option 'D'. Can you explain this answer?
Which one of the following is correct?
a)
AFC=AVC+ATC
b)
ATC=AFC-AVC
c)
AVC=AFC+ATC
d)
AFC=ATC-AVC
|
Manju Kaindal answered |
Right answer is D . Because AVC +AFC = ATC . Then AFC = ATC -AVC
If total cost at 10 units is Rs. 600 and Rs. 640 for 11th unit. The marginal cost of 11th unit is:- a)Rs. 20
- b)Rs. 30
- c)Rs. 40
- d)Rs. 50
Correct answer is option 'C'. Can you explain this answer?
If total cost at 10 units is Rs. 600 and Rs. 640 for 11th unit. The marginal cost of 11th unit is:
a)
Rs. 20
b)
Rs. 30
c)
Rs. 40
d)
Rs. 50
|
|
Sinjini Gupta answered |
Given:
Total cost of 10 units = Rs. 600
Total cost of 11 units = Rs. 640
To find: Marginal cost of 11th unit
Solution:
Marginal cost is the additional cost incurred in producing an additional unit of output.
To find the marginal cost of the 11th unit, we need to find the additional cost incurred in producing the 11th unit.
Additional cost incurred in producing the 11th unit = Total cost of 11 units - Total cost of 10 units
= Rs. (640 - 600)
= Rs. 40
Therefore, the marginal cost of the 11th unit is Rs. 40.
Hence, option C is the correct answer.
Total cost of 10 units = Rs. 600
Total cost of 11 units = Rs. 640
To find: Marginal cost of 11th unit
Solution:
Marginal cost is the additional cost incurred in producing an additional unit of output.
To find the marginal cost of the 11th unit, we need to find the additional cost incurred in producing the 11th unit.
Additional cost incurred in producing the 11th unit = Total cost of 11 units - Total cost of 10 units
= Rs. (640 - 600)
= Rs. 40
Therefore, the marginal cost of the 11th unit is Rs. 40.
Hence, option C is the correct answer.
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