CBSE Class 12 Economics Production Function Worksheet

 

INTRODUCTORY MICROECONOMICS

PRODUCTION FUNCTION ( RETURNS TO FACTOR)

Question. Production Function explains the relationship between —
(a) Maximum Output which can be produced from given units of different inputs
(b) Price and Cost
(c) Maximum Output which can be produced at various points of time
(d) Various Stages of Production
Answer: A

Question. Which of the following statements regarding Production Function is false?
(a) It just shows the relationship between output and input
(b) It does not provide any information on the least—cost Capital Labour combination
(c) It reveals the output that yields the maximum profit 
(d) Both (a) and (c)
Answer: C

Question. Production Function specifies the . quantities of various inputs that are required to yield a given quantity of output.
(a) Minimum
(b) Maximum
(c) Average
(d) Zero
Answer: A

Question. In the long—run, ....... factors of production changes.
(a) Proportion between
(b) Quant i ty of
(c) Ne ed for
(d) None of the above
Answer: B

Question. In a Production Function, Output means —
(a) Goods and Services produced
(b) Factors of Production required
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. In the short—run, the proportion between factors of production —
(a) Remains constant
(b) Changes
(c) Is zero
(d) Is infinity
Answer: B

Question. Which of the following is/are an outcome of a technological change?
(a) A downward shift in the production function
(b) Same output with fewer inputs or more output with same inputs
(c) Invention of a product or production process
(d) Both (b) and (c) above
Answer: D

Question. In general, most of the Production Functions measure —
(a) Productivity of factors of production.
(b) Relation between the factors of production.
(c) Economies of Scale.
(d) Relations between change in physical inputs and physical output.
Answer: D

Question. A Firm's Production Function—
(a) Shows how much output and the level of input required for the firm to maximize profits.
(b) Establishes the minimum level of output that can be produced using the available resources.
(c) Shows the maximum output that can be produced with a given amount of inputs with available technology.
(d) Shows labour force which is employed
Answer: C

Question. Suppose the first four units of a variable input generate corresponding total outputs of 150, 200, 350 and 550. The marginal product of the third unit of input is:
(a) 50
(b) 100
(c) 150
(d) 200
Answer: C

Question. Which of the following statements regarding short run and long run is true?
(a) Firms plan for the long run but operate in the short run
(b) Firms plan in the short run but operate in the long run
(c) Firms operate and plan as well in the long run
(d) Firms operate and plan as well in the short run
Answer: A

Question. In the short—run, factors of production changes.
(a) Proportion between
(b) Quantity of
(c) Both (a) and (b)
(d) Neither (a) nor (b) 
Answer: A

Question. The time period(s) covered in Economics Study is / are —
(a) short—run
(b) long—run
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. ..... is the period of time in which all but one factor of production are variable.
(a) Short—run
(b) Long—run
(c) Medium—run
(d) None of the above
Answer: A

Question. All Factors of Production become variable in —
(a) Medium—run
(b) Short —run
(c) Long—run
(d) None of the above
Answer: C

Question. There is no Fixed Factor of Production in the long—run planning horizon. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. Production function is _____
(a) purely technical relationship between input &output
(b) Purely economic relationship between input &output
(c) Both (a) & (b)
(d) None of the these
Answer: A

Question. Variable Factors means those Factors of Production —
(a) Which can be only changed in the long run
(b) Which can be changed in the short run
(c) Which can never be changed
(d) All of the above
Answer: B

Question. is the functional relationship between physical inputs (i.e. factors of production), and physical outputs (i.e. quantity of goods / services produced).
(a) Input—Output Function
(b) Demand—Supply Function
(c) Production Function
Answer: C

Question. In the long—run, the quantity of factors of production
(a) Remains constant
(b) Changes
(c) Is zero
(d) Is infinity
Answer: B

Question. There is only one Fixed Factor of Production in the short—run planning horizon. This statement is —
(a) True
(b) False
(c) Partially True
(d) None of the above
Answer: A

Question. The difference between Fixed and Variable Factors of Production is relevant in —
(a) Medium—run
(b) Short —run
(c) Long—run
(d) All of the above
Answer: B

Question. Marginal Product (MP) Curve cuts average product (AP), when —
(a) MP < AP
(b) MP = AP
(c) MP > AP
(d) MP = 0
Answer: B

Question. When 50 hours of Labour are spent, total output quantity is 2,000 units, When 55 hours of Labour are spent, total output quantity is 2,250 units. Here, Marginal Product will be —
(a) 2,250
(b) 2,000
(c) 250
(d) 50
Answer: C

Question. In a Production Function, Input means —
(a) Goods and Services produced
(b) Factors of Production required
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. In the short—run, factor(s) of production is / are variable.
(a) All
(b) None
(c) One
(d) All of the above
Answer: C

Question. Production Function states the relationship between inputs and output, keeping technology
(a) Zero
(b) Increasing trend
(c) Decreasing trend
(d) Constant
Answer: D

Question. Law of Returns to Scale is applicable to —
(a) Medium—run
(b) Short —run
(c) Long—run
(d) All of the above
Answer: C

Question. In the short—run, the proportion between factors of production changes because —
(a) One of the Factor is kept constant
(b) Every Factors is kept constant
(c) It is not the long—run
(d) There is no explanation for such behaviour
Answer: A

Question. Under Cobb- Douglas productionfunction contribution of capital and labour respectively-
(a) 314th , 1/4th
(b) 1/4th ,314th
(c) 1/2 th , 1/2 th
(d) none of the above
Answer: B

Question. Which of the following activities cannot take place in the short—run?
(a) Changing the quantity of labour employed
(b) Changing the input combination
(c) Regular maintenance of the Plant to ensure efficient production
(d) Installation of an Additional Plant to meet future requirements
Answer: D

Question. In a Cobb-Douglas production function, two inputs are
(a) Land and Labour
(b) Capital and Labour
(c) Capital and Entrepreneur
(d) Entrepreneur and land
Answer: B

Question. The Production Function is a relationship between a given combination of inputs and—
(a) Another combination that yields the same output
(b) The highest resulting output
(c) The increase in output generated by oneunit increase in one output
(d) All levels of output that can be generated by those inputs
Answer: B

Question. If the inputs of all but one factor are held constant, then will vary with the quantity used of the Variable Factor.
(a) Total Product
(b) Average Product
(c) Marginal Product
(d) All of the above
Answer: A

Question. The short run, as economists use the phrase, is characterized by —
(a) At least one fixed factor of production
(b) A period where the law of diminishing returns does not hold
(c) No variable inputs — that is all of the factors of production are fixed
(d) All inputs being variable
Answer: A

Question. is the period of time in which all the factors of production are variable.
(a) Short—run
(b) Long—run
(c) Medium—run
(d) None of the above
Answer: B

Question. In the long—run, factor(s) of production is / are variable.
(a) All
(b) Many
(c) One
(d) None
Answer: A

Question. ... shows the overall output generated at a given level of input.
(a) Cost Function
(b) Production Function
(c) Marginal Rate of Substitution
(d) Isocost and Isoquants
Answer: B

Question. Law of ........... is applicable in the short— run.
(a) Variable Proportions
(b) Returns to Scale
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Marginal Product (MP) rises steeply, and also declines slightly earlier than Average Product (AP) Curve. This statement is —
(a) True
(b) Fal s e
(c) Partially True
Answer: A

Question. Production Function deals with _________. 
(a) Quantitative Values of Input and Output
(b) Monetary Values of Products
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. = Total Product ÷ Quantity of the Variable Factor.
(a) Total product
(b) Average Product
(c) Marginal Product
(d) All of the above
Answer: B

Question. In describing a given production technology, the short run is best described as lasting —
(a) Up to six months from now
(b) Up to five years from now
(c) As long as all inputs are fixed
(d) As long as at least one input is fixed
Answer: D

Question. The point where MP is maximum is called —
(a) Point of Increase
(b) Point of Indifference
(c) Point of Inflexion
(d) Point of Shut—down
Answer: C

Question. Marginal Product (MP) —
(a) Will have positive values only
(b) Will have negative values only
(c) Can be positive or zero or even negative.
(d) Can be positive or zero, but not negative.
Answer: C

Question. Innovation is of more importance as it helps in increasing the standard of living in the long run
(a) Process
(b) Product
(c) Plant
(d) There is no relationship between innovation processes and standard of living
Answer: B

Question. The Average Product of Labour is maximized when Marginal Product of Labour —
(a) Equals the Average Product of Labour
(b) Equals zero
(c) Is maximized
(d) None of the above
Answer: A

Question. To economists, the main difference between the short run and the long run is that —
(a) In the short run all inputs are fixed, while in the long run all inputs are variable
(b) In the short run the Firm varies all of its inputs to find the least-cost combination of inputs
(c) In the short run, at least one of the Firm's input levels is fixed
(d) In the long run, the Firm is making a constrained decision about how to use existing Plant and equipment efficiently
Answer: C

Question. Production Function specifies —
(a) Maximum amount of output that can be produced with given quantities of inputs
(b) Minimum quantities of various inputs that are required to yield a given quantity of output.
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. In the long—run, the quantity of factors of production changes because —
(a) One of the Factor is kept constant
(b) Every Factor is kept constant
(c) Every Factor is considered variable
(d) There is no explanation for such behaviour
Answer: C

Question. Law of ............ is applicable in the long—run.
(a) Variable Proportions
(b) Returns to Scale
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. is the total output resulting from the efforts of all the factors of production, combined together at any time.
(a) Total Product
(b) Average Product
(c) Marginal Product
(d) All of the above
Answer: A

Question. Average Product (AP) —
(a) Will have positive values only
(b) Will have negative values only
(c) Can be positive or zero or even negative.
(d) Can be positive or zero, but not negative.
Answer: D

Question. shows the output produced with a given amount of inputs.
(a) Cost Function
(b) Production Function
(c) Demand Function
(d) Isoquants
Answer: B

Question. The difference between Fixed and Variable Factors of Production arises only in —
(a) Medium—run
(b) Short —run
(c) Long—run
(d) None of the above
Answer: B

Question. If Total Product (TP) increases, Marginal Product (MP) will be —
(a) Positive
(b) Negative
(c) Zero
(d) Infinity
Answer: A

Question. is the Total Product per unit of the Variable Factor.
(a) Total Product
(b) Average Product
(c) Marginal Product
(d) All of the above
Answer: B

Question. The Marginal Product of a variable input is best described as—
(a) Total product divided by the number of units of variable input
(b) The additional output resulting from a one unit increase in the variable input
(c) The additional output resulting from a 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
Answer: B

Question. Which of the following is the best definition of the "Production Function"?
(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
(d) The relationship between the quantity of inputs and the firm's marginal cost of production
Answer: C

Question. is the improvement in the production techniques for existing production.
(a) Process Innovation
(b) Product Innovation
(c) Plant Innovation
(d) Production Function
Answer: A

Question. Which Law examines the production
(a) Law of Increasing Returns to Scale
(b) Law of Variable Proportion
(c) Law of Diminishing Marginal Utility
Answer: B

Question. When the Law of Diminishing Returns operates
(a) Marginal Cost falls at a decreasing rate
(b) Marginal Cost increases
(c) Marginal Cost falls at a constant rate
(d) Marginal Cost falls at an increasing rate
Answer: B

Question. Which of the following is an assumption in the Law of Variable Proportions?
(a) The Fixed Factor of production is scarce
(b) There are no perfect substitutes for the Fixed Factor
(c) Factors of Production can be used
Answer: D

Question. As per the Law of Diminishing Returns, Fixed Factor becomes inadequate because —
(a) It is scarce
(b) It has no perfect substitutes
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Which of the following is not an assumption in the Law of Variable Proportions?
(a) There are no perfect substitutes for the Fixed Factor
(b) Factors of Production can be used in any proportion
(c) Only physical quantities of inputs and outputs are considered
(d) None of the above
Answer: D

Question. Which of the following is not an assumption in the Law of Variable Proportions?
(a) There are no perfect substitutes for the Fixed Factor
(b) Only one factor input is considered variable, while all other factors are fixed.
(c) State of Technology is improved as more output is produced
(d) Only physical quantities of inputs and outputs are considered
Answer: C

Question. Which of these is a reason for the operation of Law of Increasing Returns?
(a) Specialisation of functions
(b) Division of Labour
(c) Effective use of Fixed Factor of Production
(d) All of the above
Answer: D

Question. In the stage of Diminishing Returns, Marginal Product (MP) —
(a) First increases, reaches a maximum and then decreases
(b) Decreases
(c) Increases
(d) Remains constant
Answer: B

Question. In agriculture, the land area is taken as constant, while number of workers can be increased. If we apply the Law of Variable Proportions in this situation, it means that the Variable Factor of Production is —
(a) Number of workers
(b) Land
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. In the production of wheat, all of the following are variable factors that are used by the farmer except —
(a) The seed and fertilizer used when the crop is planted
(b) The field that has been cleared of trees and in which the crop is planted
(c) The tractor used by the farmer in planting and cultivating not only wheat but also corn and barley
(d) The number of hours that the farmer spends in cultivating the wheat fields
Answer: B

Question. The Law of analyses the production function with one factor as variable, keeping quantities of other factors fixed.
(a) Returns to Scale
(b) Multiple Proportions
(c) Variable Proportions
(d) Fixed Proportions
Answer: C

Question. Which of the following statements show the Stage of Diminishing Returns under the Law of Variable Proportions?
(a) Marginal Product is negative
(b) Marginal Product is falling and it is negative
(c) Marginal Product is falling but it is positive
(d) None of the above
Answer: C

Question. Which of the following is true?
(a) TP remains positive during the First Stage
(b) AP starts declining after the Point of Inflexion
(c) All of these
Answer: A

Question. When a Factory is working at 70% capacity, increasing of variable inputs, leads to—
(a) Increasing of output
(b) Decreasing of output according to the Law of Diminishing Returns
(c) Increasing of output up to full capacity and later decreasing of the Marginal Product according to the Law of Diminishing Returns
(d) Decreasing of output up to full capacity and later increasing of the output
Answer: C

Question. Which of the following is a reason for the operation of the Law of Diminishing Returns?
(a) Inefficiency of Fixed Indivisible Factors
(b) Inadequacy of Fixed Indivisible Factors
(c) Indifference of Fixed Indivisible Factors
(d) Immobility of Fixed Indivisible Factors
Answer: B

Question. In the stage of Increasing Returns, Total Product (TP) —
(a) Remains constant
(b) Increases
(c) Decreases
(d) Becomes negative
Answer: B

Question. Law of Variable Proportions is valid when —
(a) Only one input is varied and all other inputs are kept constant
(b) All Factors are kept constant
(c) All inputs are varied in the same proportion
(d) Any of the above
Answer: A

Question. The Law of Variable Proportions deals with —
(a) Output Quantities
(b) Monetary Values
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. If all factors are required to be used in fixed proportions, then the Law of Variable Proportions —
(a) Will apply
(b) Will not apply at all
(c) Both (a) and (b) are true to some extent
(d) Neither (a) nor (b) is true
Answer: B

Question. The Law of Variable Proportions operates in —
(a) Medium—run
(b) Short —run
(c) Long—run
(d) All of the above
Answer: B

Question. The "Law of Diminishing Returns" applies to—
(a) The short run, but not the long run
(b) The long run, but not the short run
(c) Both the short run and the long run
(d) Neither the short run nor the long run
Answer: A

Question. In the stage of Diminishing Returns, Average Product (AP) —
(a) Remains constant
(b) Increases
(c) Decreases
(d) Becomes negative
Answer: C

Question. The stage of Negative Marginal Returns applies from ................. to ...................
(a) Origin to Point where AP is maximum Point where AP is maximum to Point when
(b) Point when TP declines and and MP becomes negative.
(c) All the above
Answer: B

Question. The Law of Variable Proportions assumes that factors of production —
(a) Can be used in any proportion
(b) Cannot be used at all
(c) Do not affect production
Answer: A

Question. In the stage of Increasing Returns, Average Product (AP) —
(a) Remains constant
(b) Increases
(c) Decreases
(d) Becomes negative
Answer: B

Question. In the stage of Increasing Returns, Marginal Product (MP)-
(a) Remains constant
(b) Increases
(c) Decreases
(d) First increases, reaches a maximum and then decreases
Answer: D

Question. The Law of Variable Proportions is also called —
(a) Law of Proportionality
(b) Law of Diminishing Returns
(c) Law of Diminishing Marginal Physical Productivity
(d) All of the above
Answer: D

Question. What result we get in the first stage of Law of Variable Proportions?
(a) Total Product is increasing at an increasing rate
(b) Average Product increases only till Inflexion Point
(c) (a) but not (b)
(d) Both (a) & (b)
Answer: C

Question. In the stage of Diminishing Returns —
(a) MP and AP remain positive
(b) MP and AP become negative
(c) MP is positive but AP becomes negative
(d) MP becomes negative but AP remains positive
Answer: A

Question. In the stage of Negative Marginal Returns, Marginal Product (MP) —
(a) Increases
(b) Remains constant
(c) Decreases but does not become negative
(d) Becomes negative
Answer: D

Question. The Law of Negative Marginal Returns operates be caus e the Variable Factor is in relation to the Fixed Factor of Production.
(a) Optimal
(b) Adequate
(c) Excessive
(d) Irrelevant
Answer: C

Question. A Firm is operating at an output level, where its Total Product is increasing at an increasing rate. This implies that the Firm's
(a) Marginal Cost must be falling at an increasing rate
(b) Marginal Product is increasing at a increasing rate
(c) Average Product is increasing
(d) Both (a) and (c)
Answer: D

Question. The Law of Variable Proport ions analyses the wi th one factor as variable, keeping quantities of other factors fixed.
(a) Revenue Function
(b) Production Function
(c) Cost Function
(d) Demand and Supply Function
Answer: B

Question. Which of the following is the reason of the working of law of increasing returns?
(a) Fuller utilization of fixed factor
(b) Indivisibility of factor
(c) Greater specialization of factor
(d) All of the above
Answer: D

Question. In agriculture, the land area is taken as constant, while number of workers can be increased. If we apply the Law of Variable Proportions in this situation, it means that the Fixed Factor of Production is —
(a) Number of workers
(b) Land
(c) Units of Output produced
(d) All the above
Answer: B 

Question. During the stage of Decreasing Returns —
(a) AP is negative
(b) MP is decreasing
(c) MP is negative
(d) Both (a) and (b)
Answer: B

 

→ MEANING OF PRODUCTION

Production is defined as the transformation of inputs into output. Production includes both production of physical goods and production of services

→ PRODUCTION FUNCTION

• The term production function means the technical and physical relationship between inputs used and the resulting output.

• It includes only technically efficient combinations of inputs (i.e., those which minimise the cost of production).

• A production function is expressed as:
Q=f (K, L) Where Q is output, labour (L) and capital (K), required to produce a good
Types of Production Function

• Short-run Production Function. It refers to production in the short-run where there are some fixed factors. In short-run, production increases when more units of variable factors are used with certain amount of fixed factor.

• Long-run Production Function. It refers to production when all factors are increased in the same proportion Fixed Factors and Variable Factors Fixed factors refer to those factors whose supply cannot be changed during short run. E.g. land, plant, factory building, minimum electricity bill, etc. Variable factors refer to those factors whose supply can be varied or changed. E.g. raw materials, daily wage workers, etc.

→ CONCEPTS OF PRODUCT

• Total Physical Product (TPP) or Total Product (TP): It is defined as the total quantity of goods and services produced by a firm with the given inputs during a specified period of time.

• In the short-run, TP can be increased by employing more units of the variable factor.

• In the long-run, TP can be increased by employing more units of all factors.

TP Curve

TP curve starts from the origin, increases at an increasing rate, reaches a maximum and finally decreases at an increasing rate

→ Average Product (AP)

Average Product (AP): It is defined as the amount of output produced per unit of the variable factor (labour) employed

                                                 AP = Total physical product / Labour Input = TP / L

AP is zero when no labour is employed. Initially, AP increases, reaches maximum and finally starts declining. AP curve is an inverted U-shaped.

→ Marginal Product (MP)

It is defined as the change in TP resulting from the employment of an additional unit of a variable factor (labour). symbolically, MP can be written as :

Initially MP increases with employment of units of labour. MP starts declining to become zero and finally becomes negative. MP curve is inverted U-shaped.

 

Relationship between TP, AP and MP Curves

• AP curve is the slope of the straight line from the origin to each point on the TP curve. MP curve is the slope of the TP curve at each point.

• When AP is maximum, MP = AP.

• When TP is maximum, MP = O.

• When TP is falling, MP is negative.

• Both AP and MP curves are inverted U-shaped.

Law of Diminishing Marginal Product

If we keep increasing the employment of the variable input with other fixed inputs then eventually a point will be reached after which the marginal product of that input will start falling. MP of a factor input initially rises, when the level of employment of the input is low, but after reaching a certain level of employment, it starts falling.

The Law of Variable Proportion

Statement of the laws Law of Variable Proportion
The law of variable proportion states that when total output or production of a commodity is increased by adding units of a variable input, while the quantities of other inputs are held constant, the increase in total production, after some point, diminishes.

• Assumptions of the Law

• The assumptions of the law of variable proportion are:

• State of technology remains the same.

• All units of the variable factor, labour, are homogenous.

• There must always be some fixed input and diminishing returns results due to fixed supply of the fixed factor.

 

Please click on below link to download CBSE Class 11 Economics Production Function Worksheet