Production and Costs quiz

When MP is zero, TP is:

When AP is maximum, MP is:

The AFC curve is a:

Which cost is zero at zero output?

If doubling all inputs triples output, there are:

MC curve cuts the AC curve at:

The difference between AC and AVC is:

In the short run:

In the Cobb-Douglas function q = x1^a x2^b, constant returns to scale occur when:

Rent of a factory building is an example of:

Why does the TVC curve start from the origin? (2 marks)

Explain the relationship between TP and MP. (2 marks)

Why is the gap between AC and AVC decreasing as output increases? (2 marks)

Define an isoquant. (2 marks)

Why does MP eventually decline? (2 marks)

Can AP fall while MP is rising? Explain. (2 marks)

Distinguish between short run and long run costs. (2 marks)

Why is the long run AC curve U-shaped? (2 marks)

Why can TFC never be zero in the short run? (2 marks)

What happens to AC when MC is less than AC? (2 marks)

The MP of labour for the first 5 units is 8, 12, 10, 6 and 2. Calculate TP at each level and the AP at 5 units. (3 marks)

TFC of a firm is Rs 100 and TVC at 5 units is Rs 150. Calculate TC, AC, AFC and AVC at 5 units. (3 marks)

A firm's TC for output 0 to 4 is Rs 40, 60, 75, 85 and 100. Calculate MC at each level and AVC at 4 units. (3 marks)

The AC of producing 10 units is Rs 25 and of 11 units is Rs 24.50. Calculate the MC of the 11th unit. (3 marks)

For q = 2 L^0.5 K^0.5, find output when L = 4 and K = 9. What happens to output when both L and K are doubled? Name the returns to scale. (3 marks)

Read the passage and answer the questions. A farmer with 2 acres of land keeps adding workers. Output rises fast with the first three workers, then rises slowly, and after the eighth worker output starts falling as workers get in each other's way. (i) Name the law shown. (ii) Identify the three phases in this example. (iii) Up to how many workers should the farmer employ? (5 marks)

Read the passage and answer the questions. A bakery pays Rs 20,000 per month as shop rent and Rs 15 per loaf for flour, butter and electricity. It produces 2,000 loaves a month. (i) Calculate TFC and TVC. (ii) Calculate AC per loaf. (iii) What happens to AFC if output rises to 4,000 loaves? (5 marks)

Read the passage and answer the questions. When a car company doubled its labour, machines and plant size, its output increased by 150%. Later, when it doubled again, output rose by only 80%. (i) Identify the returns to scale in each case. (ii) Give one reason for each. (iii) Draw a diagram of the LRAC curve showing these. (5 marks)

Read the passage and answer the questions. A firm finds that the marginal cost of producing the 50th unit is Rs 40, while its average cost at 49 units is Rs 45. (i) Will AC rise or fall at 50 units? (ii) Explain the MC-AC relationship. (iii) At what point does MC equal AC? (5 marks)

Read the passage and answer the questions. A textile factory in Surat employs workers with fixed looms. The owner noticed that MP of the 10th worker was zero. (i) What is the TP at this point? (ii) What happens if an 11th worker is added? (iii) What should the owner do? (5 marks)

Explain the law of variable proportions with a schedule and diagram, giving reasons for each phase. (6 marks)

Explain returns to scale with the Cobb-Douglas production function and examples of each type. (6 marks)

Explain the short run cost curves (TFC, TVC, TC, AFC, AVC, AC, MC) with schedules and diagrams. (6 marks)

Explain the relationship between AC and MC, and between AVC and MC, with a diagram. Why does MC cut AVC before AC? (6 marks)

Explain the long run cost curves (LRAC and LRMC) and why they are U-shaped. Draw a diagram. (6 marks)