204 Microeconomics XI – by Subhash Dey

20. When total revenue is maximum, marginal revenue is also maximum.

21. When marginal revenue is positive and constant, average and total revenue will both increase at constant rate.
22. When total revenue is constant average revenue will also be constant.
23. When marginal revenue falls to zero, average revenue becomes maximum.
24. For a producer to be in equilibrium, MC = MR is the only condition.
25. Total cost rises only when marginal cost rises.
26. When marginal product is zero, total product is maximum.
27. Both average product and marginal product can be negative.
28. A rational producer aims to operate in the first phase of production as total product increases at increasing rate.
29. When average product is maximum, marginal product is greater than average product.
30. Average product can rise even when marginal product starts declining.
31. Under diminishing returns to a factor, total product continues to increase till marginal product reaches zero.
32. Under diminishing returns to a factor, marginal product and total product both increase at a diminishing rate.
33. When total product is constant, average product will fall.
34. Average product falls only when marginal product is less than average product.
35. Average cost can rise even when marginal cost is falling.
36. Total fixed cost is more than total variable cost at zero level of output.
37. Total cost is always the summation of marginal costs.
38. Marginal cost is not affected by total fixed cost.
39. Total cost can never be constant.
40. The difference between average total cost and average variable cost decreases with decrease in the level of output.
41. When marginal cost rises, average cost also rises.
42. Average cost will rise only when marginal cost rises.
43. As output increases the difference between average cost and average variable cost decreases.
44. Average Revenue curve under the Perfect Competition is a downward sloping curve.
45. When MR is falling but positive, TR will also be falling and positive.
46. Average revenue and marginal revenue curves slope downwards when more output can be sold by reducing the
prices.
47. Marginal Revenue can never be negative.
48. Total revenue curve always starts from the origin.
49. MR curve always lies below the AR curve.
50. When total revenue is constant, average revenue falls.
51. Total Revenue increases with every increase in output.
52. Marginal Revenue can never be zero.
53. At the state of producer’s equilibrium, marginal cost of the firm should be rising.
54. If marginal cost is equal to marginal revenue at two output levels, then any one of the output level can be producer’s equilibrium.
55. Contraction of supply occurs due to change in factors other than price of the given commodity.
56. In case of perfectly inelastic supply, supply curve is a horizontal straight line.
57. A cost saving technology shifts the supply curve of a commodity towards right.
58. The supply curve of a good shifts to the right when prices of other goods in production rise.
59. Price elasticity of supply of a good is 0.8. The supply of the good is inelastic.

Objective Type Questions, MCQs

1. In the second phase of production, ................... .
(a) TP increases of decreasing rates (b) MP falls
(c) AP falls (d) All of these
 UNIT 3: Producer Behaviour and Supply 205

2. Why does AFC curve not touch the X-axis?

(a) AFC cannot be zero. (b) AFC cannot be negative.
(c) AFC can never be less than 1. (d) None of these.
3. In the short run, with the decrease in output, average fixed cost .................... .
(a) increases (b) remains fixed
(c) decreases (d) increases initially, then decreases
4. Which of the following curve is not a U-shaped curve?
(a) AVC curve (b) AFC curve
(c) AC curve (d) MC curve
5. The MR curve of a firm which can sell more output at the same price is the same as the .................... .
(a) Profit curve (b) Demand curve
(c) Phillips curve (d) Indifference curve
6. The equilibrium condition of a firm is .................... .
(a) MR = MC (b) AR = AC
(c) MR = AR (d) MC = AC
7. A firm can sell more output at the same price ` 10. What will be the marginal revenue by selling 20th unit?
(a) `2 (b) `200
(c) `210 (d) `10
8. Price elasticity of supply of a good if the supply curve passing through the origin is .................... .
(a) equal to one (b) less than one
(c) more than one (d) zero
9. The total cost at 5 units of output is `30. The fixed cost is `5. The average variable cost at 5 units of output is:
(a) `25 (b) `6
(c) `5 (d) `1
10. ................... measures the productivity of a factor input.
(a) Total product (b) Average product
(c) Marginal product (d) Returns to a factor
11. .............., at any particular level of employment of an input, is the average of all marginal products up to that
level.
(a) Total product (b) Average product
(c) Marginal product (d) Returns to a factor
12. ................... refers to change in output when only one input is changed, other inputs remaining unchanged.
(a) Total product (b) Average product
(c) Marginal product (d) Returns to a factor
13. ..................... shows the pattern of change in total product when only one input is increased, other inputs
remaining unchanged.
(a) Marginal product (b) Average product
(c) Law of variable proportions (d) Returns to a factor
14. If total investment in fixed assets is ` 200000, borrowings @ 12% p.a. is ` 150000, wages paid ` 12000, annual
rental value of the owner’s factory building is ` 10000 and estimated annual value of the management services of
the owner is ` 24000, the implicit cost will be ....................... .
(a) ` 46000 (b) ` 24000
(c) ` 34000 (d) ` 40000
15. What is the behaviour of AP when TP increases at a decreasing rate ?
(a) AP increases (b) AP decreases
(c) AP may increase or decrease (d) AP is constant
206 Microeconomics XI – by Subhash Dey

16. What is the behaviour of TVC when MC falls?

(a) TVC falls (b) TVC rises at a decreasing rate
(c) TVC rises at an increasing rate (d) TVC rises at a constant rate
17. When output is increased, initially MC falls. It means ......................
(a) MP of the variable factor increases (b) AC falls
(c) AVC falls (d) All of these
18. How does AC behave when AVC rises?
(a) AC rises (b) AC may fall or rise
(c) AC falls (d) AC is constant
19. When TR rises at a decreasing rate, what is the behaviour of MR?
(a) MR rises (b) MR is constant
(c) MR falls (d) MR falls and can become negative
20. Which of the following will cause a leftward shift of a firm’s supply curve?
(a) Technological progress (b) Fall in input prices
(c) Subsidy on production (d) Rise in prices of other goods
21. Which of the following statements accurately describe the relationship between AP and MP?
(a) AP rises when MP is above it and falls when MP is below it.
(b) MP intersects AP at its minimum point.
(c) AP an MP are always parallel to each other.
(d) AP is always rising when MP is falling and vice-versa.
22. When MP is zero, when can you say about TP?
(a) TP is increasing (b) TP is maximum
(c) TP is falling (d) None of these
23. When average product increases, the marginal product is:
(a) Less than average product (b) Equal to the average product
(c) More than average product (d) None of these
24. What is the behaviour of TP, when MP becomes negative?
(a) TP increases at an increasing rate (b) TP increases at diminishing rate
(c) TP is maximum (d) TP decreases
25. When AP is maximum, MP is equal to ______ .
(a) AP (b) TP
(c) Zero (d) One
26. Both AP and MP curves are generally ______ .
(a) U-shaped (b) Inversely U-shaped
(c) Rising (d) Falling
27. The Marginal Product of a variable input is best described as:
(a) Total product divided by the number of units of variable input.
(b) Additional output resulting from a unit increase in the variable input
(c) Additional output resulting from a unit increase in both variable and fixed inputs.
(d) Additional output resulting from a unit increase in the units produced.
28. If AP of one unit of a variable factor is 12 units and that of 2 units of the variable factor is 16 units, then the
marginal product of 2nd unit of the variable factor is ______ .
(a) 28 units (b) 20 units
(c) 4 units (d) 44 units
 UNIT 3: Producer Behaviour and Supply 207

29. The cost curve, which is inverse S-shaped is:

(a) Average Cost Curve (b) Total Fixed Cost Curve
(c) Total Variable Cost Curve (d) Marginal Cost Curve
30. Area under AVC curve is equal to:
(a) TVC (b) AFC
(c) AVC (d) AC
31. Which formula is incorrect to determine the value of TC in the short run?
(a) TC = TVC + TFC (b) TC = SMC
(c) TC = AC × Output (d) TC = SMC + TFC
32. Minimum point of MC curve comes before the minimum point of:
(a) AC curve (b) AVC curve
(c) Both (a) and (b) (d) Neither (a) nor (b)
33. AVC can fall even when MC is rising, provided:
(a) MC < AVC (b) MC > AVC
(c) MC = AVC (d) None of these
34. Which condition is incorrect:
(a) AC can rise when MC is falling (b) AC can fall when MC is rising
(c) AVC can fall when MC is rising (d) AC can rise when MC is rising
35. When change in total cost is divided by change in output, we get:
(a) Average cost (b) Total variable cost
(c) Marginal cost (d) Average variable cost
36. Which of the following cost curves is rectangular hyperbola?
(a) Average cost curve (b) Marginal cost curve
(c) Average variable cost curve (d) Average fixed cost curve
37. When AC is rising MC is:
(a) Equal to AC (b) More than AC
(c) Less than AC (d) Constant
38. A firm producing 6 units of output has average total cost of ` 150 and has to pay ` 240 to its fixed factors of
production. What will be the average variable cost at 6 units of output?
(a) `150 (b) `900
(c) `110 (d) `1440
39. A firm has total variable cost of ` 1,000 at five units of output. If total fixed costs are ` 400, what will be the
average total cost at five units of output?
(a) `280 (b) `80
(c) `200 (d) `1400
40. A firm’s average cost (AFC) is ` 20 at six units of output. What will be AFC at three units of output?
(a) `20 (b) `30
(c) `40 (d) `50
41. Initially, even when there is an increase in AVC, AC may still decline because:
(a) Fall in AFC < Rise in AVC (b) Fall in AFC > Rise in AVC
(c) Fall in AFC = Rise in AVC (d) None of these
42. The average fixed cost at 4 units of output is ` 20. Average variable cost at 5 units of output is ` 40. Average cost
of producing 5 units is:
(a) `20 (b) `40
(c) `56 (d) `60
208 Microeconomics XI – by Subhash Dey

43. A firm is producing 20 units. At this level of output, ATC and AVC are respectively equal to `40 and `37. What
will be the total fixed cost of the firm?
(a) `77 (b) `97
(c) `60 (d) `3
44. Total cost of producing 9 units of output is ` 85. If average total cost of producing 10 units is ` 10, then what
will be the marginal cost of producing this level of output?
(a) `15 (b) `75
(c) `95 (d) `10
45. The AC of producing 5 units is ` 6 and AC of producing 6 units is ` 5. What will be the MC of the 6th unit?
(a) `6 (b) `5
(c) `11 (d) 0
46. A firm is operating with a Total Variable Cost of `500 when 5 units of the given output are produced and the
Total Fixed Costs are `200. What will be the Average Total Cost of producing 5 units of output?
(a) `140 (b) `100
(c) `120 (d) `300
47. If a firm’s production department data says that the total variable cost for producing 8 units and 10 units of
output is `2,500 and `3,000 respectively, marginal cost will be:
(a) `100 (b) `150
(c) `500 (d) `250
48. If average revenue curve is a horizontal straight line, then marginal revenue curve will be:
(a) Downward sloping (b) Horizontal straight line
(c) Upward sloping (d) Inverse S-shaped
49. When MR remains same, TR increases at a:
(a) Constant rate (b) Decreasing rate
(c) Increasing rate (d) None of these
50. When price remains same with rise in output, AR curve is:
(a) Vertical straight line parallel to Y-axis (b) Horizontal straight line parallel to X-axis
(c) Downward sloping (d) Positively sloped
51. When price falls with rise in output, TR is ________ when MR is zero.
(a) Maximum (b) Minimum
(c) Zero (d) None of these
52. When price falls with rise in output, then:
(a) MR curve is steeper than AR curve
(b) AR curve is steeper than MR curve
(c) MR and AR curves coincide in a horizontal straight parallel to the X-axis.
(d) None of these
53. When total revenue is constant, what will be the effect on average revenue?
(a) AR will fall (b) AR will increase
(c) AR will also be constant (d) No effect on AR
54. If TR curve is a horizontal straight line parallel to X-axis, then MR curve will:
(a) Coincide with X-axis (b) Slope downwards
(c) Slope upwards (d) Horizontal straight line parallel to the X-axis
55. When the rate of fall in MR is more than fall in AR:
(a) Price increases with increase in output
(b) Price decreases with increase in output
(c) Price remains constant with increase in output
(d) None of these
 UNIT 3: Producer Behaviour and Supply 209

56. If a firm’s total revenue curve takes the shape of an upward rising straight line which passes through the origin, then:
(a) Price > MR (b) Price = MR
(c) Price < MR (d) None of these
57. When 5 units of good is sold, total revenue is `100. When 6 units are sold, marginal revenue is `8. At what
price are 6 units sold?
(a) `28 per unit (b) `20 per unit
(c) `18 per unit (d) `12 per unit
58. Suppose total revenue is rising at a constant rate as more and more units of a commodity are sold, marginal
revenue would be:
(a) Greater than Average Revenue (b) Equal to Average Revenue
(c) Less than Average Revenue (d) Rising
59. A firm is able to sell any quantity of a good at a given price. The firm’s marginal revenue will be:
(a) Greater than Average Revenue (b) Less than Average Revenue
(c) Equal to Average Revenue (d) Zero
60. A firm is able to sell more quantity of a good only by lowering the price. The firm’s marginal revenue, as he goes
on selling, would be:
(a) Greater than Average Revenue (b) Less than Average Revenue
(c) Equal to Average Revenue (d) Zero
61. Producer’s Equilibrium under MR-MC approach is achieved when:
(a) MR = MC
(b) MC > MR after the equality between MR and MC
(c) Both (a) and (b)
(d) Either (a) or (b)
62. If MR is more than MC at a particular level of output, then producer will:
(a) Reduce production (b) Increase production
(c) Keep the production at current level (d) None of these
63. In case of _________, supply falls at the same price.
(a) Decrease in supply (b) Contraction of supply
(c) Increase in supply (d) Extension of supply
64. In case of _________, supply curve is a horizontal straight line parallel to the X-axis.
(a) Perfectly elastic supply (b) Perfectly inelastic supply
(c) Unitary elastic supply (d) Elastic supply
65. The cause of upward movement along a supply curve is:
(a) Decrease in Price (b) Increase in Income
(c) Decrease in Income (d) Increase in Price
66. When Total Revenue is maximum, Marginal Revenue is:
(a) Minimum (b) Maximum
(c) Zero (d) Constant
67. When percentage change in price is equal to percentage change in supply :
(a) Es > 1 (b) Es = 1
(c) Es < 1 (d) Es = 0
68. What is the behaviour of Average Revenue when Total Revenue increases at constant rate?
(a) Average revenue remains constant. (b) Average revenue increases.
(c) Average revenue decreases. (d) Average revenue is zero.
69. What is the behaviour of TP when MP is zero?
(a) TP is minimum. (b) TP is maximum.
(c) TP is constant. (d) TP is zero.
210 Microeconomics XI – by Subhash Dey

70. Which of the following short run cost curve is parallel to x-axis?
(a) AFC (b) TVC
(c) TFC (d) TC
71. If supply curve is parallel to Y-axis, __________.
(a) Es = 0 (b) Es = ∞
(c) Es = 1 (d) Es > 1
72. When per unit price remains constant, __________.
(a) AR > MR (b) AR < MR
(c) AR = MR (d) TR is constant
73. When Total Product is falling, __________.
(a) MP is maximum (b) MP = zero
(c) MP becomes negative (d) MP is falling
74. When Average Product is maximum, __________.
(a) MP > AP (b) MP = AP
(c) MP < AP (d) MP is also maximum
75. In Phase II (Diminishing Returns to a factor) of law of variable proportrions, total product __________.
(a) increases at increasing rate (b) increases at diminishing rate
(c) falls (d) becomes negative
76. In an imperfectly competitive market, if the Total Revenue is maximum, Marginal Revenue will be ___________.
77. If the Total Product (TP) is maximum, Marginal Product (MP) will be ___________.
78. The total product (TP) for the first 4 units of a variable factor is given below. Choose the correct alternative
which shows phase of Increasing Returns to a factor.
(a) 20, 45, 75, 110 (b) 20, 45, 70, 95
(c) 20, 40, 60, 80 (d) 20, 35, 45, 50
79. Movement along supply curve is:
(a) Change in supply (b) Change in quantity supplied
(c) (a) and (b) both (d) None of these
80. What will be the likely behaviour of marginal product, when total product increases at diminishing rate?
81. In which period all factors of production are variable?
82. “Supply of a commodity never changes unless its own price changes.” (True/False)
83. Which of the following is the general shape of AP curve?
(a) ‘U’ Shape (b) ‘S’ shape
(c) Inverse ‘U’ shape (d) Inverse ‘S’ shape
84. The Marginal product curve cuts the average product curve at ___________.
85. Choose the correct match:
(a) Increasing return to a factor ⇒ TP increases at increasing rate
(b) Diminishing return to a factor ⇒ TP decreases
(c) Negative Return to a factor ⇒ TP increases at diminishing rate
86. Match the following & choose the correct option:
(A) MP negative (i) TP decreases
(B) MP zero (ii) TP maximum
(C) MP falls but remain positive (iii) TP increases
(a) (A) – (i), (B) – (ii), (C) – (iii) (b) (A) – (i), (B) – (iii), (C) – (ii)
(c) (A) – (iii), (B) – (ii), (C) – (i) (d) (A) – (ii), (B) – (iii), (C) – (i)
 UNIT 3: Producer Behaviour and Supply 211

87. Which of the following short run cost can never become zero?
(a) Total variable cost (b) Marginal cost
(c) Average variable cost (d) Average fixed cost
88. The average cost of 4 units of output is `40. The total fixed cost at 5 units of output is `50. What will be total
variable cost?
(a) `210 (b) `110
(c) `90 (d) `160
89. The cost which does not change with change in output is called __________ .
90. Fill up the blanks:
Cost = Explicit cost +__________+__________
91. Which of the following is the shape of TFC curve?
(a) ‘U’ shape (b) Inverse ‘U’ shape
(c) ‘S’ shape (d) Straight line parallel to axis
92. With the increase of output, AFC continuously ____________.
93. Choose the correct formula:
(a) TC = DTVC/DQ (b) MC = AC × Q
(c) AVC = TVC/ Q (d) AFC = TFC × Q
94. Which of the following is correct?
(a) MC = TC – TVC (b) TC = TFC + TVC
(c) MC = TCn + 1 – TVCn (d) TFC = AFC ÷ Q
95. Which of the following cost is included in marginal costs?
(a) Fixed cost (b) Variable cost
(c) Both fixed and variable costs (d) None of these
96. Total Revenue (TR) at 4 units of level of output is ` 100. Marginal Revenve (MR) at 5 units of level of output is
`15. What will be Average Revenve (AR) at 5 units of level of output?
(a) `23 (b) `25
(c) `27 (d) `29
97. If TR = Total Revenue, Q = Quantity of Output, D = change, n= number of units of commodity, then
MR(Marginal Revenue) equals ___________.
(a) DTR/DQ (b) TRn – TRn–1
(c) Both (a) and (b) (d) AR × Q
98. In which market form, AR = MR?
(a) Perfect competition (b) Monopolistic competition
(c) Monopoly (d) Both (b) and (c)
99. A firm can sell more units of a good only by reducing the price of a commodity. Marginal Revenue of this firm
___________.
(a) will be more than Average Revenue (b) will be equal to Average Revenue
(c) will be less than Average Revenue (d) will be negative
100. Match the following & choose the correct option:
(A) Marginal Revenue (MR) (i) TRn + 1 – TRn
(B) Average Revenue (AR) (ii) TR/Q
(iii) DTR/DQ
(a) (A) – Both (i) & (ii), (B) – (iii) (b) (A) – (i), (B) – Both (ii) & (iii)
(c) (A) – Both (i) & (iii), (B) – (ii) (d) (A) – (iii), (B) – Both (i) & (ii)
212 Microeconomics XI – by Subhash Dey

101. A firm can sell more and more quantity of a commodity at a given price. In such a case, the firm’s Marginal
Revenue will be ____________ Average Revenue. (Equal to/Greater than / Less than)
102. Average Revenue is always equal to _______________.
(a) Price (b) Marginal Revenue
(c) Average cost (d) None of these
103. What will be the shape of AR curve of a firm which can sell any quantity of a commodity at a given price?
104. What will be the shape of MR curve of a firm which can sell more quantity of a commodity only by lowering the
price?
105. What will be the likely behaviour of AR when TR increases at constant rate after selling an additional unit of a
good?
106. AR (Average Revenue) at 5 units of output is ` 100. TR at 6 units of output is ` 560. The value of MR
(Marginal Revenue) at 6 units of output will be:
(a) `60 (b) `460
(c) `660 (d) `1,160
107. Choose the correct match:
(a) TR is maximum ⇒ MR is maximum
(b) TR increases at diminishing rate ⇒ MR is increases
(c) TR increases at constant rate ⇒ MR is constant
108. Choose the correct match:
(a) MR > AR ⇒ AR decreases
(b) MR < AR ⇒ AR increases
(c) MR = AR ⇒ AR remain constant
109. Fill in the blanks:
Two conditions of producer’s equilibrium are (i) MR = MC (ii) _________ ?
110. If TR = TC, a firm:
(a) earns normal profit. (b) earns abnormal profit.
(c) incurs loss. (d) None of these
111. At Break Even Point:
(a) TR = TC (b) AR = MC
(c) MR = AC (d) MR = MC
112. Which of the following is the necessary condition of producer’s equilibrium:
(a) MR = MC (b) After equilibrium MR < MC
(c) MR > MC (d) Both (a) and (b)
113. At the point of producer equilibrium:
(a) MR = MC (b) MR > C
(c) MR < MC (d) None of these
114. At a price of `20, the publisher of a book is expected to sell 9,000 copies. If the book is offered for sale at a price
of ` 15, then the publisher can expect to sell ____________.
(a) less than 9,000 copies (b) 9,000 copies
(c) more than 9,000 copies (d) It is impossible to predict the effect of a lower price on sales.
115. If the manufacturers are producing more number of shoes than people want, _________.
(a) there is an excess supply and price can be expected to decrease
(b) there is an excess supply and price can be expected to increase
(c) there is an excess demand and price can be expected to decrease
(d) there is an excess demand and price can be expected to increase
 UNIT 3: Producer Behaviour and Supply 213

116. Car manufacturers use many inputs in the production process. If prices of those inputs increase, then the supply
curve moves ___________. (upward/downward)
117. Read the following schedule:
Price Quantity
2 20
3 30
4 50
5 90
The above schedule shows demand function or supply function? Give valid reason.
118. Which of the following will NOT shift the market supply curve of good X?
(a) A change in the cost of inputs used to produce good X.
(b) A change in the technology used to produce X.
(c) A change in the number of sellers of good X.
(d) A change in the price of good X.
119. Which of the following is/are determinant of the supply of good X?
(a) Own price of the commodity and number firms in the industry
(b) Government policies and state of Technology
(c) Price of related goods
(d) All of the above are determinants of the supply of good X.
120. A “decrease in supply” is graphically represented by __________________.
(a) a leftward shift in the supply curve.
(b) a rightward shift in the supply curve.
(c) a movement up and to the right along a supply curve.
(d) a moment down and to the left along a supply curve.
121. The supply of a good refers to _______________.
(a) Stock available for sale (b) Total stock in the warehouse
(c) Actual production of the good (d) Various quantities of the good offered for sale at various prices
122. If sellers expect the price of a good to rise in the future, the result is __________.
(a) an increase in supply today. (b) a decrease in quantity supplied today.
(c) an decrease in demand today. (d) and increase in quantity supplied today.
123. Fill up the blanks by appropriate word given in bracket quantity supplied refers to ............... (various quantities/
specific quantity/) of a commodity ready to sell at .......... (specific price/different prices) of the commodity at a
point of time.
124. Supply schedule is a table showing __________.
(a) various quantities of a commodity offered for sale at a specific price at a point of time.
(b) specific quantity of a commodity offered for sale at different possible prices at a point of time.
(c) specific quantity of a commodity offered for sale at a specific price at a point of time.
(d) various quantities of a commodity offered for sale at different possible prices at a point of time.
125. The supply of icecream rises from 100 units to 500 units due to rise in price of icecream from ` 2 per unit to `5
per unit. This change leads to _____________.
(a) extension in supply (b) contraction in supply
(c) increase in supply (d) decrease in supply
126. Due to increase in GST, the supply of Air Conditioners decrease from 20 units to 10 units at the same price.
This situation leads to ____________.
(a) extension in supply (b) contraction in supply
(c) increase in supply (d) decrease in supply
 214 Microeconomics XI – by Subhash Dey

127. The supply curve of coffee shifted leftwards when price of its substitute good (tea) ......................(decreases/increases)
128. In case of extension of supply, the supply curve __________.
(a) moves from a lower point to an upper point on same supply curve
(b) shifts rightwards
(c) shifts leftwards
(d) moves from an upper point to a lower point on same supply curve
129. Choose the wrong statement:
(a) Market supply schedule is the supply schedule of the industry as a whole.
(b) Because tomato is a perishable good, supply of tomato is less elastic than the supply of furniture.
(c) Price elasticity of supply is the ratio of percentage change in quantity supplied and percentage change in
profit of a firm.
(d) Law of supply states that there is a positive relationship between price and quantity supplied of a commodity.
130. A vertical supply curve parallel to Y-axis implies that the elasticity of supply is:
(a) Zero. (b) Infinity.
(c) Equal to one. (d) Greater than zero but less than infinity.
131. Quantity supplied of a good refers to:
(a) actual production of the good.
(b) total existing stock of the good.
(c) stock available for sale.
(d) amount of the good offered for sale at a particular price per unit of time.
132. An increase in the supply of a good is caused by:
(a) improvements in its technology (b) fall in the prices of other goods
(c) fall in the prices of factors of production (d) All of these
133. Elasticity of supply refers to the degree of responsiveness of supply of a good to changes in its:
(a) demand. (b) price.
(c) cost of production. (d) state of technology.
134. A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is:
(a) zero. (b) infinite.
(c) equal to one. (d) greater than zero but less than one.
135. Contraction of supply is the result of:
(a) decrease in the number of producers. (b) decrease in the price of the good concerned.
(c) increase in the prices of other goods. (d) decrease in the outlay of sellers.
136. The quantity supplied of a good or service is the amount that:
(a) is actually bought during a given time period at a given price.
(b) producers wish they could sell at a higher price.
(c) producers plan to sell during a given time period at a given price.
(d) people are willing to buy during a given time period at a given price.
137. If price of computers increases by 10% and supply increases by 25%. The elasticity of supply is:
(a) 2.5 (b) 0.4
(c) (-) 2.5 (d) (-) 0.4
138. An increase in the number of sellers of bikes will increase the:
(a) the price of a bike. (b) demand for bikes.
(c) the supply of bikes. (d) demand for helmets.
139. When supply curve shifts to the left, it means
(a) Smaller supply at a given price. (b) Larger supply at a given price.
(c) Constant supply at a lower price. (d) None of these
 UNIT 3: Producer Behaviour and Supply 215

140. When supply curve shifts to right, it means:

(a) supply increases. (b) supply decreases.
(c) supply remains constant. (d) None of these
141. The elasticity of supply is defined as the:
(a) responsiveness of the quantity supplied of a good to a change in its price.
(b) responsiveness of the quantity supplied of a good without change in its price.
(c) responsiveness of the quantity demanded of a good to a change in its price.
(d) responsiveness of the quantity demanded of a good without change in its price.
142. Elasticity of supply is measured by dividing the percentage change in quantity supplied of a good by __________.
(a) Percentage change in income. (b) Percentage change in quantity demanded of goods.
(c) Percentage change in price. (d) Percentage change in taste and preference.
143. Elasticity of supply is zero means
(a) perfectly inelastic supply. (b) perfectly elastic supply.
(c) imperfectly elastic supply. (d) none of the above.
144. Elasticity of supply is greater than one when
(a) proportionate change in quantity supplied is more than the proportionate change in price.
(b) proportionate change in price is greater than the proportionate change in quantity supplied.
(c) change in price and quantity supplied are equal.
(d) None of the above.
145. If the quantity supplied is exactly equal to the relative change in price then the elasticity of supply is
(a) less than one. (b) greater than one.
(c) one. (d) None of these
146. The price of a commodity decreases from ` 6 to ` 4 and the quantity demanded of the good increases from 10
units to 15 units, find the coefficient of price elasticity of supply.
(a) 1.5 (b) 2.5
(c) –1.5 (d) 0.5
147. The supply function is given as Q = 100 + 10P. Find the elasticity of supply when price is `15.
(a) 0.4 (b) 1
(c) 0.6 (d) –1
148. If the percentage change in supply is less than the percentage change in price it is called:
(a) unit elasticity of supply. (b) perfectly elastic.
(c) more elastic supply. (d) inelastic supply.
149. The supply curve shifts to the right because of _____________.
(a) improved technology. (b) increased price of factors of production.
(c) increased excise duty. (d) All of these
150. 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.
151. 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.
216 Microeconomics XI – by Subhash Dey

152. 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.
153. Diminishing marginal returns implies:
(a) decreasing average variable costs. (b) decreasing marginal costs.
(c) increasing marginal costs. (d) decreasing average fixed costs.
154. The short run, as economists use the phrase, is characterized by:
(a) At least one fixed factor of production.
(b) Generally a period which is shorter than one year.
(c) All factors of production are fixed and no variable inputs.
(d) All inputs are variable and production is done in less than one year.
155. 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.
156. 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.
157. Which of the following is the best definition of “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 output.
(d) The relationship between the quantity of inputs and the firm’s marginal cost of production.
158. The “law of diminishing returns to a factor” 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.
159. Diminishing returns to a factor 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.
160. Use the following information to answer the question that follows:
Hours of Labour Total Product Marginal Product
0 – –
1 100 100
2 – 80
3 240 –
What is the marginal product of the third hour of labour?
(a) 60 (b) 80
(c) 100 (d) 240
 UNIT 3: Producer Behaviour and Supply 217

161. Which cost increases continuously with the increase in production?

(a) Average cost. (b) Marginal cost.
(c) Fixed cost. (d) Variable cost.
162. Which of the following cost curves is never ‘U’ shaped?
(a) Average cost curve. (b) Marginal cost curve.
(c) Average variable cost curve. (d) Average fixed cost curve.
163. Total cost in the short run is classified into fixed costs and variable costs. Which one of the following is a variable cost?
(a) Cost of raw materials. (b) Cost of equipment.
(c) Interest payment on past borrowings. (d) Payment of rent on building.
164. 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.
165. With which of the following is the concept of marginal cost closely related?
(a) Variable cost. (b) Fixed cost.
(c) Opportunity cost. (d) Economic cost.
166. Which of the following statements is correct?
(a) When the average cost is rising, the marginal cost must also be rising.
(b) When the average cost is rising, the marginal cost must be falling.
(c) When the average cost is rising, the marginal cost is above the average cost.
(d) When the average cost is falling, the marginal cost must be rising.
167. Which of the following is an example of “explicit cost”?
(a) The wages a proprietor could have made by working as an employee of a large firm.
(b) The income that could have been earned in alternative uses by the resources owned by the firm.
(c) The payment of wages by the firm.
(d) The normal profit earned by a firm.
168. Which of the following is an example of an “implicit cost”?
(a) Interest that could have been earned on retained earnings used by the firm to finance expansion.
(b) The payment of rent by the firm for the building in which it is housed.
(c) The interest payment made by the firm for funds borrowed from a bank.
(d) The payment of wages by the firm.
169. Use the following data to answer the question that follows:
Output (in units) 0 1 2 3 4 5 6
Total Cost (in `) 240 330 410 480 540 610 690
Diminishing marginal returns start to occur between units of output:
(a) 2 and 3 (b) 3 and 4
(c) 4 and 5 (d) 5 and 6
170. Marginal cost is defined as:
(a) the change in total cost due to a unit change in output.
(b) total cost divided by output.
(c) the change in output due to a unit change in an input.
(d) total product divided by the quantity of input.
171. Which of the following is true of the relationship between the marginal cost function and the average cost function?
(a) If MC is greater than ATC, then ATC is falling.
(b) The ATC curve intersects the MC curve at minimum MC.
(c) The MC curve intersects the ATC curve at minimum ATC.
(d) If MC is less than ATC, then ATC is increasing.
218 Microeconomics XI – by Subhash Dey

172. Which of the following statements is true of the relationship among the average cost functions?
(a) ATC = AFC – AVC (b) AVC = AFC + ATC.
(c) AFC = ATC + AVC (d) AFC = ATC – AVC
173. Which of the following statements is correct concerning the relationships among the firm’s cost functions?
(a) TC = TFC – TVC. (b) TVC = TFC – TC
(c) TFC = TC – TVC. (d) TC = TVC – TFC.
174. Suppose output increases in the short run. Total cost will:
(a) increase due to an increase in fixed costs only.
(b) increase due to an increase in variable costs only.
(c) increase due to an increase in both fixed and variable costs.
(d) decrease if the firm is in the region of diminishing returns.
175. A firm’s average total cost is ` 300 at 5 units of output and ` 320 at 6 units of output. The marginal cost of
producing the 6th unit is :
(a) `20 (b) `120
(c) ` 320 (d) ` 420
176. A firm producing 7 units of output has an average total cost of ` 150 and has to pay ` 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) `200 (b) `50
(c) `300 (d) ` 100
177. A firm has a variable cost of ` 1000 at 5 units of output. If fixed costs are ` 400, what will be the average total
cost at 5 units of output?
(a) `280 (b) `60
(c) `120 (d) `1400
178. A firm’s average fixed cost is ` 20 at 6 units of output. What will it be at 4 units of output?
(a) `60 (b) `30
(c) `40 (d) `20
179. 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.
180. 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 one-unit increase in one output.
(d) all levels of output that can be generated by those inputs.
181. If the marginal product of labour is below the average product of labour, it must be true that:
(a) the marginal product of labour is negative. (b) the marginal product of labour is zero.
(c) the average product of labour is falling. (d) the average product of labour is negative.
182. 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.
183. What is a production function?
(a) Technical relationship between physical inputs and physical output.
(b) Relationship between fixed factors of production and variable factors of production.
(c) Relationship between a factor of production and the utility created by it.
(d) Relationship between quantity of output produced and time taken to produce the output.
 UNIT 3: Producer Behaviour and Supply 219

184. The production function:

(a) Is the relationship between the quantity of inputs used and the resulting quantity of product.
(b) Tells us the maximum attainable output from a given combination of inputs.
(c) Expresses the technological relationship between inputs and output of a product.
(d) All the above
185. The production process described below exhibits.
Number of Workers Output
0 0
1 23
2 40
3 50
(a) constant marginal product of labour. (b) diminishing marginal product of labour.
(c) increasing return to scale. (d) increasing marginal product of labour.
186. Which of the following is a variable cost in the short run?
(a) rent of the factory.
(b) wages paid to the factory labour.
(c) interest payments on borrowed financial capital.
(d) payment on the lease for factory equipment.
187. In the short run, the firm’s product curves show that:
(a) Total product begins to decrease when average product begins to decrease but continues to increase at a
decreasing rate.
(b) When marginal product is equal to average product, average product is decreasing but at its highest.
(c) When the marginal product curve cuts the average product curve from below, the average product is equal
to marginal product.
(d) In stage two, total product increases at a diminishing rate and reaches maximum at the end of this stage.
188. A fixed input is defined as:
(a) That input whose quantity can be quickly changed in the short run in response to the desire of the company
to change its production
(b) That input whose quantity cannot be quickly changed in the short run, in response to the desire of the
company to change its production.
(c) That input whose quantities can be easily changed in response to the desire to increase or reduce the level of
production.
(d) That input whose demand can be easily changed in response to the desire to increase or reduce the level of
production.
189. Average product is defined as:
(a) total product divided by the total cost.
(b) total product divided by marginal product.
(c) total product divided by the number of units of variable input.
(d) marginal product divided by the number of units of variable input.
190. Which of the following statements is true?
(a) After the inflection point of the production function (i.e. the point from where the TP curve changes its
shape), a greater use of the variable input induces a reduction in the marginal product.
(b) Before reaching the point of decreasing marginal returns, the quantity of output obtained can increase at an
increasing rate.
(c) The first stage corresponds to the range in which the AP is increasing as a result of utilizing increasing
quantities of variable inputs.
(d) All of the above.
220 Microeconomics XI – by Subhash Dey

191. Marginal product, mathematically, is the slope of the

(a) total product curve. (b) average product curve.
(c) marginal product curve. (d) implicit product curve.
192. Suppose the first four units of a variable input generate corresponding total outputs of 200, 350, 450, 500. The
marginal product of the third unit of input is:
(a) 50 (b) 100
(c) 150 (d) 200
193. Which of the following statements is false in respect of fixed cost of a firm?
(a) As the fixed inputs for a firm cannot be changed in the short run, the TFC are constant, except when the
prices of the fixed inputs change.
(b) TFC continue to exist even when production is stopped in the short run, but they exist in the long run even
when production is not stopped.
(c) Total Fixed Costs (TFC) can be defined as the total sum of the costs of all the fixed inputs associated with
production in the short run.
(d) In the short run, a firm’s fixed cost cannot be escaped even when production is stopped.
194. Diminishing marginal returns for the first four units of a variable input is exhibited by the total product sequence:
(a) 50, 50, 50, 50 (b) 50, 110, 180, 260
(c) 50, 100, 150, 200 (d) 50, 90, 120, 140
195. Use the following table to answer the question given below it:
Units of Labour 0 1 2 3 4 5 6
Output (unit) 0 6 14 20 24 24 20
MP of the 3rd unit of labour is _____, the MP of the _____ labour is negative.
(a) 6; 4th (b) 20; 3rd
(c) 20; 5th (d) 6; 6th
196. In the third of the three stages of production:
(a) the marginal product curve has a positive slope.
(b) the marginal product curve lies completely below the average product curve.
(c) total product increases.
(d) marginal product is positive.
197. When marginal costs are below average total costs,
(a) average fixed costs are rising. (b) average total costs are falling.
(c) average total costs are rising. (d) average total costs are minimized.
198. The marginal cost for a firm of producing the 9th unit of output is ` 20. Average cost at the same level of output
is `15. Which of the following must be true?
(a) marginal cost and average cost are both falling
(b) marginal cost and average cost are both rising
(c) marginal cost is rising and average cost is falling
(d) it is impossible to tell if either of the curves are rising or falling
199. Implicit cost can be defined as
(a) Money payments made to the non-owners of the firm for the self-owned factors employed in the business
and therefore not entered into books of accounts.
(b) Money not paid out to the owners of the firm for the self owned factors employed in a business and
therefore not entered into books of accounts.
(c) Money payments which the self owned and employed resources could have earned in their next best
alternative employment and therefore entered into books of accounts.
(d) Money payments which the self owned and employed resources earn in their best use and therefore entered
into book of accounts.
 UNIT 3: Producer Behaviour and Supply 221

200. In figure below, possible reason why the average variable cost curve approaches the average total cost curve as
output rises is:

(a) Fixed costs are falling while total costs are rising at rising output
(b) Total costs are rising and average costs are also rising.
(c) Marginal costs are above average variable costs as output rises.
(d) Average fixed costs are falling as output
201. Marginal cost changes due to changes in:
(a) Total cost (b) Average cost
(c) Variable cost (d) Quantity of output
202. Which of the following statements is correct?
(a) Fixed costs vary with change in output.
(b) If we add total variable cost and total fixed cost we get the average cost.
(c) Marginal cost is the result of total cost divided by number of units produced.
(d) Total cost is obtained by adding up the fixed cost and total variable cost.
203. Assume that when price is ` 20, the quantity demanded is 9 units, and when price is ` 19, the quantity demanded
is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9
units to 10 units.
(a) `20 (b) `19
(c) `10 (d) `1
204. Assume that when price is ` 20, the quantity demanded is 15 units, and when price is ` 18, the quantity
demanded is 16 units. Based on this information, what is the marginal revenue resulting from an increase in
output from 15 units to 16 units?
(a) `18 (b) `16
(c) `12 (d) `28
205. Suppose a firm is producing a level of output such that MR > MC, what should be firm do to maximize its
profits?
(a) The firm should do nothing. (b) The firm should hire less labour.
(c) The firm should increase price. (d) The firm should increase output.
206. Marginal Revenue is equal to:
(a) The change in price divided by the change in output.
(b) The change in quantity divided by the change in price.
(c) The change in P × Q due to a unit change in output.
(d) Price, but only if the firm is a price searcher.
222 Microeconomics XI – by Subhash Dey

207. Suppose that a sole proprietorship is earning total revenues of ` 1,00,000 and is incurring explicit costs of `
75,000. If the owner could work for another company for ` 30,000 a year, we would conclude that :
(a) The firm is incurring an economic loss.
(b) Implicit costs are ` 25,000.
(c) The total economic costs are `1,00,000.
(d) The individual is earning an economic profit of ` 25,000.
208. Which is the first order condition for the profit of a firm:
(a) AC = MR (b) MC = MR
(c) MR = AR (d) AC = AR
209. For a price-taking firm :
(a) marginal revenue is less than price.
(b) marginal revenue is equal to price.
(c) marginal revenue is greater than price.
(d) the relationship between marginal revenue and price is indeterminate.
210. Average revenue curve is also known as:
(a) Profit Curve (b) Demand Curve
(c) Average Cost Curve (d) Indifference Curve
211. Total revenue =
(a) Price × Quantity (b) Price × Income
(c) Income × Quantity (d) None of these
212. Average revenue is the revenue earned:
(a) per unit of input (b) per unit of output
(c) different units of input (d) different units of output
213. AR can be symbolically written as:
(a) MR / Q (b) Price × quantity
(c) TR / Q (d) None of these
214. AR is also known as:
(a) price (b) income
(c) revenue (d) None of these
215. Marginal revenue can be defined as the change in total revenue resulting from the:
(a) purchase of an additional unit of a commodity
(b) sale of an additional unit of a commodity
(c) sale of subsequent units of a product
(d) None of the above
216. 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
Use the following cost schedule to answer questions 217-219:
Output (in units) 0 1 2 3 4 5 6
Total Cost (in `) 240 330 410 480 540 610 690
217. The average fixed cost of 2 units of output is
(a) `80 (b) `85
(c) ` 120 (d) `205
218. The marginal cost of the sixth unit of output is:
(a) ` 133 (b) `75
(c) `80 (d) `450
 UNIT 3: Producer Behaviour and Supply 223

219. Average Variable Cost of 4 units of output is:
(a) `75 (b) `135
(c) `60 (d) Cannot say because of insufficient data
220. Suppose that a sole proprietorship is earning total revenues of `10, 00,000 and is incurring explicit costs of
`7,50,000. The owner could work for another company for `3, 00, 000 a year. What will be the implicit cost of
the firm?
(a) ` 3,00,000 (b) ` 2,50,000
(c) `7,50,000 (d) None of these
221. Which one of the following short-run cost increases continuously with the increase in production?
(a) Average cost (b) Marginal cost
(c) Total Fixed cost (d) Total Variable cost
222. In monopoly, the relationship between average and marginal revenue curves is as follows:
(a) AR curve lies above the MR curve
(b) AR curve coincides with the MR curve
(c) AR curve lies below the MR curve
(d) AR curve is parallel to the MR curve
223. Yesterday, seller A supplied 400 units of a good X at ` 10 per unit. Today, seller A supplies the same quantity of
units at ` 5 per unit. Based on this evidence, seller A has experienced:
(a) Decrease in supply. (b) Increase in supply.
(c) Increase in the quantity supplied. (d) Decrease in the quantity supplied.
224. Which of the following is a variable cost in the short run?
(a) Wages paid to factory labour
(b) Payment on the lease for factory equipment
(c) Rent on the factory
(d) Interest payments on borrowed financial capital
225. If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are
caught the fisherman’s price elasticity of supply for fresh fish is _________.
(a) zero (b) infinite
(c) one (d) Cannot say
226. 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
227. Elasticity of supply refers to the degree of responsiveness of supply of a good to changes in its _________.
(a) demand (b) price
(c) costs of production (d) state of technology
228. If a seller realizes ` 10,000 after selling 100 units and ` 14,000 after selling 120 units. What is the marginal revenue here?
(a) `4000 (b) ` 450
(c) ` 200 (d) ` 100
229. Which of the following cost curves in never ‘U’ shaped?
(a) Average cost curve (b) Marginal cost curve
(c) Average variable cost curve (d) Average fixed cost curve
230. The marginal cost curve intersects the average cost curve when average cost is:
(a) Maximum (b) Minimum
(c) Rising (d) Falling
231. Under the perfect competition a firm will be in Equilibrium when :
(a) MC = MR (b) MC cuts the MR from below
(c) MC is rising when it cuts the MR (d) All of these
224 Microeconomics XI – by Subhash Dey

A competitive firm sells as much as of its product it chooses at a market price of ` 100 per unit. Its total fixed cost
is `300 and its variable costs (in `) for different levels of production are shown in the following table.
Use the table to answer questions 232-234.
Output (in units) 0 5 10 15 20 25 30 35 40 45 50
TVC (in `) 0 270 490 720 1,000 1,370 1,870 2,540 3,420 4,550 5,970
232. When production is 35 units, the average variable cost is:
(a) ` 7.25 (b) ` 72.25
(c) ` 72.57 (d) ` 85.50
233. Marginal cost per unit that corresponds to 25 units of production is __________.
(a) ` 3.50 (b) `74
(c) ` 450 (d) ` 370
234. To maximize profit, the firm should produce ___________ units of output.
(a) 30 (b) 35
(c) 45 (d) 50
235. A firm’s average fixed cost is ` 20 at 6 units of output. What will it be at 4 units of output?
(a) `60 (b) `30
(c) `40 (d) `20
236. Diminishing marginal returns imply:
(a) decreasing average variable costs. (b) decreasing marginal costs.
(c) increasing marginal costs. (d) decreasing average fixed costs.
237. Increasing marginal returns imply:
(a) decreasing average variable costs. (b) decreasing marginal costs.
(c) increasing marginal costs. (d) decreasing average fixed costs.
238. Marginal cost is defined as :
(a) the change in total cost due to one unit change in output
(b) total cost divided by output
(c) the change in output due to a one unit change in an input
(d) total product divided by the quantity of input
239. If a competitive firm doubles its output, its total revenue:
(a) doubles. (b) more than doubles.
(c) less than doubles. (d) cannot be determined because the price of the good may rise or fall.
240. 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.

Revision Questions
1. Explain the law of variable proportions through the behaviour of both total product and marginal product?
Give reasons. 6 marks
2. Explain the law of variable proportions with the help of total product and marginal product curves. (6 marks)
3. Explain the law of returns to a factor with the help of total product and marginal product schedule. (6 marks)
4. Explain the relationship between marginal product and average product. (3 marks)
5. What is the likely behaviour of marginal product when only one input is increased for increasing production?
Use diagram. (4 marks)
6. State the different phases of returns to a factor in terms of total product. Represent the same on a diagram. (4 marks)