Test: Production And Costs - 1 - UPSC MCQ

Production function is an expression of the technological relation between physical inputs and output of a good.
Symbolically: Ox = f i1, i2, i3…. in)
{Where: Ox = Output of commodity x; f = Functional relationship; i1, i2, …. in = Inputs needed for Ox}
Example of Production function:
Suppose a firm is manufacturing chairs with the help of two inputs, say labour (L) and capital (K). Then, production function can be written as: OChairs = f (L, K)
Production function defines the maximum chairs (OChairs ), which can be produced with the given capital and labour inputs. If production functions is expressed as: 250 = (7L, 2K). It means, 7 units of labour and 2 units of capital can produce maximum of 250 chairs.

When we employee more units of variable factor(labour) on fixed factor(land) then at the end of the point total production (tp) decrease because of more labour.

In the long run TPP changes with the change in all the factors  is the right option because total product can be change in long run production function. After change every situation because in long run production more time should be taken by performer.

In short run ..time period for production is very short ..so for increasing production only variable factor can increase instead of fixed factor. for example... a company make 40units of good x by using 3 units of labour and 5 units of capital ...if They wants to increase production from 40 to 45 so they will use 4units of labour and 5units of capital.

Marginal physical product (MPP) is the change in the level of output due to a change in the level of variable input; restated, the MPP is the change in TPP for each unit of change in quantity of variable input.
Total physical product (TPP) -- Quantity of output that is produced from a firm's fixed inputs and a specified level of variable inputs.
So, by adding all the MPP, TPP can be derived.
 

Some factors of production remain fixed, leading to diminishing marginal product.

Explanation: In the short run, at least one input is fixed, leading to the law of diminishing marginal returns.

In the context of isoquants, a negative slope indicates:

• An increase in one input allows for a reduction in the other input while maintaining the same output.
• This reflects the principle of substitutability between inputs.
• As one input increases, the other can decrease, keeping the output constant.
• This relationship is crucial for understanding how to optimise resource allocation in production.

Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped.

When the Marginal Product (MP) is greater than the Average Product (AP), the following occurs:

• The Average Product (AP) begins to increase.
• This is because MP contributes more to the overall output than the average of previous outputs.
• As long as MP remains above AP, AP will continue to rise.
• Once MP falls below AP, the AP will start to decrease.

The Marginal Product (MP) curve intersects the Average Product (AP) curve at a specific point that is crucial for understanding production efficiency.

Here are the key points regarding this intersection:

• The intersection occurs when AP is at its maximum.
• At this point, the MP is equal to the AP.
• Before this intersection, the MP is greater than the AP, causing the AP to rise.
• After the intersection, the MP becomes less than the AP, leading to a decline in the AP.

Thus, the relationship between MP and AP is essential for analysing production levels and efficiency.