Section A :

Each question carries one mark :

1. As the variable input of labour is increased by one unit, total output falls. What can you
say about Marginal Productivity of labour?
Fall in the total output with increase in the units of variable input (labour) indicates the
Phase III of the Law of Variable Proportions. Here the Marginal productivity of labour
becomes negative.
2. To economist, the main difference between short run and long run;

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a. In short run all inputs are fixed, while in long run all inputs are variable.
b. In short the firm varies all of its inputs to find the least cost combination of inputs.

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c. In short, at least one of the firms input level is fixed.
d. In long run, the firm is making a constrained decision about how to use existing plant
and equipment efficiently.

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3. Diminishing marginal returns for the first four units of a variable input is

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exhibited by which of the following total product sequence :
a. 50,50,50,50
b. 50,110,180,260
c. 50,100.150,200
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d. 50,90,120,140

4. When AP falls what is the relation between AP and MP?

When AP falls, MP< AP. MP curve lies below the AP curve, the AP curve slopes downwards.
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5. Define Production function?

DA

Production function is an expression which states the mathematical relation between the
physical inputs used in the production of a good and physical output of that good.

6. Define Marginal Physical Product.

Marginal Physical Product (MPP/MP) is defined as the addition to the total product on
account of employment of one more unit of the variable input. Therefore, MP=TPn – TPn-1
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7. The law of variable proportions is drawn under all of the assumptions mentioned below
except the assumptions that:
a. The technology is changing.
b. There must be some inputs whose quantity is kept fixed.
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c. We consider only physical inputs and not economically profitability in monetary

terms.
d. The technology is given and stable.
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8. What do you mean by Returns to a factor?

By ‘Returns to a factor’ we mean a change in the physical output of a good when only the
quantity of one input(or a factor of production) is increased, while that of the other inputs kept
constant.
9. Give the phase in which a rational producer will operate in the short run. Why?
Phase II, is the ideal phase for production for a rational producer in the short run. In Phase I,
there is still scope for increasing TP of the firm due to underutilization of resources, so the
firm shifts to Phase II. Phase III is not an ideal stage for production as MP is negative and TP

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 also starts to fall leading to overutilization of resources. Therefore, Phase II is the ideal stage,
as TP is maximum and there is proper utilization of fixed factors.
10. How is TPP derived from APP?
Average Physical Product (APP) refers to the output produced per unit of variable input. So,
AP= ________TP_________
Units of variable factor.
Therefore, TP= AP x Units of variable factor.
11. What do you mean by Returns to scale?
At what rate the output of a good change when all inputs used in production of that good are
changed simultaneously and in the same proportion. The resulting behaviour of output is
termed as Returns to scale. It is a long run concept.

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12. How is TPP derived from MPP?
Total Physical Product refers to the total output of a good produced by the variable factor

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employed. Whereas, Marginal Physical Product refers to the addition to the TPP on account of
employment of one more unit of the variable factor.
Therefore, TPP= Σ𝑀𝑃

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13. When the Average Product (AP) is maximum, the Marginal Product (MP) is: (Choose the
correct alternative)

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a. Equal to AP
b. Less than AP
c. More than AP
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d. Can be any of the above
14. Read the following statements: Statement 1 and Statement 2. Choose one of the correct
alternatives given below:
Statement 1: Variable Factors can be changed in the short run.
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Statement 2: Variable Factors are not required in case of Zero output.

Alternatives:
a. Both the statements are true.
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b. Both the statements are false.

c. Statement 1 is true and statement 2 is false.
d. Statement 2 is true and statement 1 is false.
15. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
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Assertion (A): A rational producer always seeks to operate in Phase II of Law of

Variable Proportions.
Reason (R): In Phase II of Law of Variable Proportions, Marginal Product is negative
Alternatives:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
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of A.
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of A.
c. Assertion (A) is true but Reason (R) is False
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d. Assertion (A) is False but Reason (R) is true.

16. Read the following statements: Statement 1 and Statement 2.Choose one of the correct
alternatives given below:
Statement 1: The production function established a relation between inputs and output,
which is economical in nature.

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 Statement 2: The production function specifies either the maximum output that can be
produced with the given inputs or the minimum quantity of inputs needed to produce a
given level of output.
Alternatives:
a. Both the statements are true.
b. Both the statements are false.
c. Statement 1 is true and statement 2 is false.
d. Statement 2 is true and statement 1 is false.
17. Read the following statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Marginal Product (MP) cuts Average Product (AP)from its top.

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Reason (R): When AP rises, MP is more than AP and when AP falls, MP is less than AP.
Alternatives:

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a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of A.

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b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct
explanation of A.
c. Assertion (A) is true but Reason (R) is False.

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d. Assertion (A) is False but Reason (R) is true.
Each question carries 3/ 4 marks: SC
18. Explain with the help of a diagram, how total product is affected when marginal product
is rising.
According to Law of Variable Proportion in Phase I- MP rises, TP increases at an increasing
rate. In the beginning, the quantity of the variable input is so small that fixed inputs cannot be
effectively utilized. As the number of worker increases, each worker is assigned a specialized
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task. This raises efficiency of the variable factor as a result MP of the variable input rises.
Diagram of TP and MP curve with brief explanation (as discussed in class).
19. Bring out the assumptions of the Law of variable Proportion.
DA

The assumptions of the law of variable proportion are as follows:

a. The ratio in which the factors of production are combined can be changed.
b. The units of variable factor are homogeneous or equally efficient and are increased
one by one.
c. State of technology remains unchanged.
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20. Explain with the help of a total product curve the meaning of increasing returns to a
factor.
Increasing returns to a factor means increase in the total physical product due to increase in
the variable inputs keeping fixed inputs unchanged. This is mainly due:
a. Fuller utilization of the fixed factor.
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b. Division of labour and increase in efficiency.

c. Better coordination between the factors.
Diagram of TP curve with explanation (as discussed in class).
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21. Explain the relationship between MPP and APP with the help of a diagram.

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MPP, APP – definition with formula.
APP- MPP relationship is as follows:

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a. When MP > AP, AP rises.
b. When MP = AP, AP is maximum and constant.

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c. When MP < AP, AP falls.
(Diagram explanation as discussed in class)
22. What do you understand by returns to scale? State the reasons for decreasing returns to
a factor.
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Returns to Scale- Is the rate at which the output of a good change when all inputs used in
production of that good are changed simultaneously and in the same proportion.
Reasons for Diminishing Returns to a Factor:
a. Fixity of Factors
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b. Imperfect Factor Substitutability

c. Poor coordination between Factors
(Explain above points, as discussed in class).
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23. Giving reasons, state whether the following are true or false:
a. When MP falls, AP will also fall - False, AP continuous to rise until MP curve cuts the
AP curve from the top. Even when MP is falling, AP continuous to increase till it
touches the MP. (use diagram – refer Q.24 b)
b. When there are diminishing returns to a factor, TP always increases and then starts
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falling - False, in phase 2 i.e. Diminishing Returns to a Factor, TP keeps increasing but
at a decreasing rate and later becomes maximum and constant. It starts to decrease in
Phase 3 i.e. Negative Returns to a Factor.
24. State the Law of variables Proportions. Explain the behavior of marginal product
according to this law.
N

The Law of Variable Proportions states that as we increase the quantity of only one input,
keeping other inputs fixed, the total product (TP) increases at an increasing rate in the
beginning, then increases at decreasing rate after a level of output and ultimately falls.
Marginal product (MP) refers to the addition to the TP on account of one more unit of the
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variable factor. MP = TPn – TPn-1

Behavior of MP according to this law:
Phase I: MP increases. In the beginning, the quantity of the variable input is so small that
fixed inputs cannot be effectively utilised. With specialisation, efficiency of the variable input
rises. As the quantity of variable input increases more effective utilisation of fixed inputs
takes place. This raises the MP of the variable input.

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 Phase II: MP starts falling, but remains positive, i.e. greater than zero. With increase in the
quantity of variable input, a pressure is built. The amount of fixed inputs looks smaller than
actually required to engage the increasing variable input. This reduces MP of the variable
factor, which however remains positive.
Phase III: MP continues to fall, and becomes negative. This is because quantity of the
variable input becomes too big in relation to quantity of fixed inputs. This reduces efficiency
of the variable input so much that MP becomes negative.

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O
O
H
SC
25. Giving reasons, state whether the following are true or false:
a. Rising TPP always imply a situation of increasing returns – False, Rising TPP does
not always imply a situation of increasing returns to a factor, because TPP also rises
when the MPP starts to fall. This situation is called diminishing returns to a factor.
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TPP rises in both these situations.

b. APP continues to rise even when MPP starts declining- True; APP continues to rise
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even when MPP starts declining. This happens as long as falling MP is more than AP.
This occurs when the fixed resources are better utilised. The MP curve cuts the AP
curve at its maximum point, which implies that AP may be increasing even if MP is
declining, as seen in the diagram.
PO
N
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26. There is always an ideal factor ratio. What happens when the factor ratio is violated?
An ideal factor ratio is the ratio when the fixed and variable factors are fully and efficiently
utilized.
Ideal Factor Ratio according to law of variable proportion is when MP = 0, TP is
maximum and constant i.e. 2nd phase of production.

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 If the Ideal factor ratio is crossed, diminishing returns to a factor set in. MP of the
variable factor starts declining, TP increases only at a decreasing rate indicating firm
entering 3rd phase of production i.e. negative returns to production.

27. Explain the relationship between TPP and MPP of an input.

TPP (Total Physical Product) refers to total output of a good produced by the variable factor
employed. TPP = Ʃ MP
MPP (Marginal Physical Product) refers to addition to the TP on account of employment of
one more unit of the variable factor. MP = TPn – TPn-1
The relation between the two is as follows:
a. When TP rises at an increasing rate, MP rises

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b. When TP rises at decreasing rate, MP falls but is positive
c. When TP falls, MP falls but is negative.

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Variable Input (units) TP (units) MP (units)

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1 10 10

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2 28 18

3 45 17
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4 52 7

5 52 0

6 48 (-)4
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(Briefly explain the table as discussed in class)

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28. Giving reasons, state whether the following are true and false:
a. Increase in the total product always indicates that there are increasing returns to a
factor – False, it is not necessary that increase in total product always indicates that
there are increasing returns to a factor because in the stage of diminishing returns to a
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factor also, total product increase but at a diminishing rate.

b. When there are diminishing returns to a factor, marginal and total product both always
fall – False, this is because when there are diminishing returns to a factor, marginal
product diminishes but total product increases at the diminishing rate.
29. Define marginal product. State the behavior of marginal product when only one input is
increased and other inputs are held constant.
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Marginal product refers to the addition to the total product on account of employment of one
more unit of the variable factor. The behaviour of MP can be classified into three phases:
a. MP increases: In the beginning, the quantity of variable input is so small that fixed
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inputs cannot be effectively utilised. As the quantity of variable input increases, more
effective utilisation of fixed inputs take place. This raises the MP of the variable input.
b. MP decreases and is positive: As the quantity of variable input increases, the amount
of fixed input is not sufficient to engage the increasing variable input. This reduces the
MP of the variable factor, which however remains positive.
c. MP becomes negative: Finally, the quantity of variable input becomes too big in
relation to the quantity of fixed inputs. This reduces the efficiency of the variable input
so much that MP becomes negative.
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30. Give the behaviour of marginal product and total product as more and more units of
only one input are employed while keeping other inputs as constant.
Refer Q.32

Each question carries 6 marks:

31. Explain the Law of Variable Proportions with the help of a diagram. Also state the
reasons behind The law.
Refer Q.24, Q.20 & Q.22
32. State and briefly explain the law underlying the change in output as the input is
changed. Also identify and explain the various stages in output as the input is changed.

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The law of variable proportions is the law underlying the change in output as the input is
changed.

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

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The different phases in the law of variable proportions are:
Phase I or Increasing Returns to a factor: As TP increases (at an increasing rate), MP also
increases. In the beginning, the quantity of the variable input is so small that fixed inputs

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cannot be effectively utilised. With specialisation, efficiency of the variable input rises. As the
quantity of variable input increases more effective utilisation of fixed inputs takes place. This
raises the TP and MP of the variable input.
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Phase II or Diminishing Returns to a factor: TP increases at a decreasing rate: MP starts
falling, but remains positive. With increase in the quantity of variable input, a pressure is built.
The amount of fixed inputs looks smaller than actually required to engage the increasing
variable input. This reduces MP of the variable factor, but remains positive, and TP increases
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at a decreasing rate.
Phase III or Negative Returns to a factor: TP starts falling: MP continues to fall, and
becomes negative. This is because quantity of the variable input becomes too big in relation to
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quantity of fixed inputs. This reduces efficiency of the variable input so much that MP
becomes negative, TP starts falling.
(Use Schedule to indicate phases of Law of variable proportion)
33. Giving reasons, state whether the following statements are true or false:
a. Average product will increase only when marginal product increases- False, average
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product can rise even when marginal product falls (use diagram to indicate).
b. Under diminishing returns to a factor, total product continues to increase till marginal
product reaches zero- True, as when MP reaches 0, TP becomes constant and
maximum indicating that there is no more scope for the addition to the total product as
by this time, the fixed factors are fully utilized.
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34. What are the different phases in the Law of variable Proportions in terms of Total
Product? Give reasons behind each phase. Use diagram.
The Law of Variable Proportions states that as we increase the quantity of only one input,
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keeping other inputs fixed, the total product (TP) increases at an increasing rate in the
beginning, then increases at decreasing rate after a level of output and ultimately falls.
The different phases in the law of variable proportions are:
Phase I or Increasing Returns to a factor: As TP increases (at an increasing rate), MP also
increases. In the beginning, the quantity of the variable input is so small that fixed inputs
cannot be effectively utilised. With specialisation, efficiency of the variable input rises. As the

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 quantity of variable input increases more effective utilisation of fixed inputs takes place. This
raises the TP of the variable input.
Phase II or Diminishing Returns to a factor: TP increases at a decreasing rate: MP starts
falling, but remains positive. With increase in the quantity of variable input, a pressure is built.
The amount of fixed inputs looks smaller than actually required to engage the increasing
variable input. This reduces MP of the variable factor, but remains positive, and TP increases
at a decreasing rate.
Phase III or Negative Returns to a factor: TP starts falling: MP continues to fall, and
becomes negative. This is because quantity of the variable input becomes too big in relation to

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quantity of fixed inputs. This reduces efficiency of the variable input so much that MP
becomes negative, TP starts falling.

O
O
H
SC
R
DA

Section B
Each question carries 3/4 marks :
35. Complete the following table :
Units of Average product Marginal product Total product
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labour (units) (units) (units)

1 8 8 8
2 10 12 20
3 10 10 30
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4 9 6 36
5 8 4 40
6 7 2 42
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TP = Ʃ MP , AP = TP/Q , MP = TPn – TPn-1

36. Which law of returns is indicated by the following table and why?
Land Units of labour Units of production
1 2 100

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 2 4 250
a. The table shows returns to scale, as both labour and land are increases in the constant
proportion.
b. It is a situation of increasing returns to scale because, when both inputs are double,
output is more than doubled, or (percentage change in output) > ( percentage change in
input)
37. Complete the following table. Identify the point where TP tends to increase at the
diminishing rate.
Labour Total Product Average Product Marginal

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(units) Product

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1 100 100 100
2 220 110 120

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3 300 100 80

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4 360 90 60
5 360 72 0
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6 300 50 -60
TP increasing
at the
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diminishing
rate.
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TP = Ʃ MP , AP = TPP/Q , MP = TPn – TPn-1

Section C :
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Each question carries 3 marks :

38. Why MP curve cuts AP curve from its top?
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 In terms of curve:
● So long as the MP curve lies above the AP curve, the AP curve slopes upwards.
● When MP curve intersects AP curve, it is the highest point of AP curve.
● When MP curve lies below the AP curve, the AP curve slopes downwards.

The MP curve cuts the AP curve from the top because it shows that after the intersection of
the two curves, the MP curve would lie below the AP curve which would mean that MP
becomes less than AP, resulting in fall in AP.
Also, if the MP curve would cut the AP curve from bottom, it would mean that value MP

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before the intersection would be less than the value of MP after the intersection, which
violates the Law of Variable Proportions according to which the behaviour of MP is such that,

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initially it increases i.e. upward sloping, and after a point of output starts decreasing i.e.
downward sloping but remains positive and ultimately becomes negative (below X axis)
Section D:

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Each question carries 3 marks:
39. Output of food grain in India at one stage was less than its domestic demand. Now it is

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not. Does it mean that law of diminishing returns has failed in Indian agriculture?
Rise in output of food grain in India is owing to the use of technology (related to high yielding
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variety of seeds). When there is an improvement in technology, the occurrence of the law of
diminishing returns is deferred for some time. It does not mean the dismissal of the law; it
only means postponement of the law. The law is bound to set in again once the effect of new
technology is exhausted.
40. Availability of agricultural land (fixed factor) is limited in the world, but demand of food
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grain is continuously increasing. Is it possible to increase the supply of food grains

continuously increasing Variable factors like seed, fertilizers etc.?
DA

Availability of agricultural land is limited in the world, production of food grains may
be increased by continuous increase in variable factors only up to ideal ratio between
fixed and variable factors of production beyond which law of negative returns will set
in.
PO
N
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