The marginal product of a variable input is best described as:

1

(a)

Total product divided by the number of units of variable input.

(b)

The additional output resulting from one unit increase in the variable input.

(c)

The additional output resulting from one unit increase in both the variable and fixed inputs.

(d)

The ratio of the amount of the variable input that is being used to the amount of the fixed input that is being used.

To economists, the main difference between short run and long run is that:

1

(a)

In short run all inputs are fixed, while in long run all inputs are variable.

(b)

In short run the firm varies all of its inputs to find the least cost combination of inputs.

(c)

In short run, at least one of the firm's input level is fixed.

(d)

In long run, the firm is making a constrained decision about how to use existing plant and equipment efficiently.

Which one of the following statements is the best definition of production function?

1

(a)

The relationship between market price and quantity supplied.

(b)

The relationship between the firm's total revenue and the cost of production.

(c)

The relationship between the quantities of inputs needed to produce a given level of output.

(d)

The relationship between the quantity of inputs and the firm's marginal cost of production.

The average product of labour is maximized when marginal product of labour:

1

(a)

Equals the average product of labour.

(b)

Equals zero.

(c)

Is maximized

(d)

None of these.

The law of variable proportions is drawn under all of the assumptions men tioned below except the assumption that:

1

(a)

The technology is changing.

(b)

There must be some inputs whose quantity is kept fixed.

(c)

We consider only physical inputs and not economically profitability in monetary terms.

(d)

The technology is given and stable.

When the quantity of a variable input is increased from 3 units to 4 units, the total output increases from 70 units to 85 units. The marginal product of the variable input is 15 units.

1

(a) False

(b) True

Total product will increase only when marginal product increases.

1

(a) True

(b) False

Average product will increase only when marginal product increases.

1

(a) True

(b) False

Under diminishing returns to a factor, total product continues to increase till marginal product reaches zero.

1

(a) False

(b) True

Average product rises only where marginal product rises.

1

(a) True

(b) False

What is the law of diminishing marginal product?

2

(a)

The Law of diminishing marginal product states that when we applied more and more units of variable factor to a given quantity of fixed factor, total product increases at a diminishing rate and marginal product falls.

What is the law of variable proportions?

2

(a)

The law of variable proportion states that as we increase the quantity of only one input, keeping other inputs fixed, the total product increases at an increasing rate in the beginning, then increases at decreasing rate and after a level the output ultimately falls.

Explain how is it possible for marginal product to fall while average product is rising?

2

(a)

Average product can rise even if marginal product is falling as long as the marginal product is higher than the average product.

Assume the marginal product for a particular good is constant. Describe the shape of the total product function that would accompany it.

2

(a)

The total product function would be upward sloping and increases at a constant rate.

Define the law of variable proportions.

2

(a)

The law of variable proportion states that as we increase the quantity of only one input, keeping other inputs fixed, the total product increases at an increasing rate in the beginning, then increases at decreasing rate and after a level the output ultimately falls.

Explain the concepts of run and the long run.

4

(a)

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

L	APL
1	2
2	3
3	4
4	4.25
5	4
6	3.5

4

(a)

Differentiate between Short Period and Long Period.

4

(a)

Explain the relationship between Marginal product and Average Product.

4

(a)

What does the Law of variable proportions show? State the behaviour of Total product according to this Law.

4

(a)

State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.

5

(a)

State the different phases of changes in Total Product and Marginal Product in the Law of Variable Proportions. Also show the same in a single diagram

5

(a)