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Assignment 7 (Unit 4) on Short Run Production:

A) Multiple Choice Questions
1. The short run, as economists use the phase, is characterized by:
a. At least one fixed factor of production & firms neither leaving & not entering the
industry.
b. A period where the law of diminishing returns does not hold good.
c. No variable inputs – that is all of the factors of production are fixed
d. All inputs being variable.
2. The law of variable proportions is drawn under all of the assumptions
mentioned below except the assumption that:

a. Technology is changing.

b. There must be some inputs where quantity is kept fixed.

c. We consider only physical inputs & not economically profitability in monetary

terms.

d. The technology is given & stable.

3. To economists. the main difference between the short run & 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 plants & equipment efficiently.
4. 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 requirements.
5. Average product of labour is defined as:
a. TPL is divided by the total cost.
b. TPL is divided by the variable input.
c. TPL is divided by marginal products.
d. MPL divided by the variable input.
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6. Change in the total product resulting from a change in a variable input is.
a. Average cost. c. Average product
b. Marginal product cost. d. Marginal product.
7. Marginal product, mathematically, is the slope of the:
a. Total product curve
b. Marginal product curve.
c. Average product curve
d. Implicit product curve.
8. The law of diminishing marginal returns indicates that marginal return.
a. Always diminish.
b. Always diminish before increasing
c. Eventually diminish.
d. Never diminish before increasing
9. If marginal product is equal to average product, then:
a. Marginal product is increasing.
b. Average product is decreasing.
c. Marginal product is decreasing.
d. The average product is not changing.
10. In describing a given production technology, the short-run is best described as
tasting:
a. Up to six months from now.
b. As long as all inputs are fixed.
c. Up to five years from now
d. As long as at least on input is fixed.
11. If the MPL is below the average product of labour, it must be true that.
a. The marginal product is negative.
b. The average product is falling.
c. The marginal product is zero.
d. The average product is negative.
12. The average product of labour is maximised when marginal product of labour:
a. Equals the APL
b. Is maximized.
c. Equals to zero
d. None of the above.
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13. The marginal, average & total product curves encountered by the firm producing

in the short run exhibit all of the following relationship except:

a. When total product is rising, average & marginal product may be either rising or
falling.
b. When marginal product is negative total product and average product is falling.
c. When the average product is at a maximum, marginal product equals
average product, & total product is rising.
d. When marginal product is at a maximum, average product equal marginal
product, and total product is rising.
14. When total product is maximum, marginal product is:
a. Falling c. Rising
b. Zero d. Negative.
15. When average product is maximum, marginal product is equal to:
a. Average Product c. Zero
b. Total Product d. One
16. A rational producer will operate in which stage of Law of variable proportion?
a. Increasing returns c. Diminishing returns
b. Constant returns d. Negative returns
17. First stage of Law of Variable proportion ranges from origin till the point where:
a. AP is maximum. c. MP is maximum.
b. TP is max. d. Point of inflexion
18. In the stage of diminishing returns, both AP & MP are falling and:
a. Negative c. Equal to one
b. Positive d. None.
19. The third stage of law of variable proportion is called:
a. Increasing returns
b. Diminishing returns
c. Negative returns
d. Unchanged returns
20. At what point is the MP maximum?
a. Turning point
b. Focal Point
c. Equilibrium point
d. Point of inflexion
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21. Which of the following is not an assumption of the law of variable proportions.
a. Only one factor is variable.
b. Technique of production remains constant.
c. The proportion of factors of production remains same.
d. Units of variable factors are homogeneous.
22. Short run production function implies technical relationships between____ in
short run.
a. Cost and revenue c. input and output
b. material and matters d. Functions and equation

23. In _____ phase of law of returns to factor TPL increases at increasing rate and
MPL, APL are positive:
a. Diminishing c. Increasing
b. Constant d. None
24. Consider production Function.
Q = 100 + 5 L + 10 L2 : Find : APL → when : L = 20
a)200
b)240
c)100 + 5 L
d ) None

25. Consider Production Function:

Q = 500 + 20 L + 25 L2 : Find : MPL → when : L = 5
a )200
b)260
c)100
d ) None

26. Consider production Function:

Q = 1000 + 500 L − 50 L2 : Find : amount − of − labour − whenTPL − is − max imum
a )20
b)5
c)100
d ) None
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B) Descriptive Questions
1. How do you find out the Law of variable proportion?
2. Show different stages of short run production & which stage does a
rational producer prefer?
3. How do you relate Marginal product of labour & Average product of
labour?
4. Explain Law of variable proportion. The owner of a car wash
measures the following short-run production function:
Q=6L-0.5L2
Where Q=Number of car washes per hour; L=Number of workers
i. Construct a schedule showing total product, average product,
the marginal product.
ii. Plot this schedule graphically.
iii. If the price of a car wash is Rs 15, how many workers should
the owner employ if he pays an hourly wage rate is Rs 6 to
each worker?
iv. Suppose he gets students to work in the evening at Rs 4 per
hour. Should he employ more workers then?
5. Explain Law of variable proportion. The following data relates to
the amount of Tuna that could be caught with different crew
sizes.
i. Construct the production schedule.
ii. Indicate the points that delineate the three stages of production
iii. If the market price of Tuna is Rs 13.5 per kg, determine how
many fishermen should the company use if the daily wage rate
is Rs 100.

Number of Fishermen Daily Tuna catch (KG)

3 300
4 450
5 590
6 665
7 700
8 725
9 710
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