Production Concepts

LAW OF VARIABLE PROPORTIONS - MCQs

LAW OF VARIABLE PROPORTIONS 9. Which of the following is an assumption in the Law
Law of of Variable Proportions?
1. The analyses the production (a) The state of tedhnology is constant and
function with one factor as
Quantities ot other factors fxed variable, keeping unchanged
(a) Returns to Scale (b) Only physical quantities of inputs and outputs
are considered
Multiple Proportions
ic) Variable Proportions (c) Only one factor input is considered variable,
(d) Fixed Proportions while all other factors are fixed
(d) Al of the above
2. The Law of Variable
the.... with one factorProportions
as variable, analyses
10. Which of the following is an assumption in the Law
quantities of other factors fixed. keeping of Variable Proportions?
(a) Revenue Function (a) The Fixed Factor of production is scarce
(b) Production Function (b) There are no perfect substitutes for the Fxed
(c) Cost Function Factor
id) Demand and Supply Funcion (c) Factors of Production can be used in any
proportion
3. The Law of (d) Allof the above
deals with input-output
rlationship, when the output is increased by varying 11. Assumption which are applicable under Law of
the quantity of one input.
(a) Variable Proportions Variable Proportion are
(b) Supply (a) State of technology is constant
(c) Demand (b) Quantities of some inputs is kept fixed
(d) Retums to Scale (c) Economic profitability in monetary terms is not
considered
A Which Law (d) Allof these
examines the production function
keping one factor variable? 12. Which of the folowing is not an assumption in the
(a) Law of Returns to Scale
(b) Law of Increasing Returns to Scale Law of Variable Proportions?
c) Law of Variable Proportion (a) There are no perfect substitutes for the Fixed
(d) Lawof Diminishing Marginal Utility Factor
(b) Factors of Production can be used in any
s The Law of Variable Proportions operates in proportion
(a) Medium-run
() Only physical quantities of inputs and outputs
are considered
(b) ShortTun (d) None of the above
(c) Long-un
(Þ) All of the above 13. Which of the folowing is not an
Law of Variable Proportions?
assumption in the
6. In the .....al factors of producion cannot (a) There are no perfect substitutes for the Fixed
be increased or decreased simultaneously. Factor
(a) Medium-run (b) Only one factor input is considered variable,
b) Short-run while all other factors are fixed.
(c) Long-run () State of Technology is improved as more output
(d) All of the above is produced
(d) Ornly physical quantities of inputs and outputs
7. The Law of Variable Proportions is also called are considered
(a) Law of Proportionality 14. Law of Variable Proportions is valid when
(b) Law of Diminishing Returns
(a) Only one input is varied and all other inputs are
(c) Law of Diminishing Marginal Physical
kept constant
Productivity (b) All Factors are kept constant
(d) All of the above
(c) All inputs are varied in the same proportion
(d) Any of the above
8. The Law of Variable Proportions deals with
(a) Output Quantities 15. The Law of Variable Proportions analyses the
(b) Monetary Values economic profitability of the Firm in monetary terms
(0) Both (a) and (b) also. This statement is -
(a) Neither (a) nor (b) (a) True
(b) False
5.39
 Foundation
Padhuka's Business Economics &Business and Commercial Knowledge- For CA
consider only physlcal Inputs In ttie stage of
(c) Partially True
(d) None of the above
(c) We
given and
monetary and
economlcally profitability In stable terms nt 30.
(AP) -
ia) Remains constant
Increasing Returns, Averag
(d) The technology is
16. The Law of Variable Proportions assumes that (b) Increases
factors Varlable Proportions Come Into (c) Decreases
of production - 23.)The Law of
(a) Can be used only in a specified
(b) Can be used in any proportion when
(a) There are only two variable
factors being id) Becomes negative
stage of
(c) Cannot be used at allproportion L(b) There is a fixed factor and a varlable factor, 31. In the Increasing Returns, Marg
(d) Do not affect production variable. (MP)
(c) All factors are yleld less. (a) Remains constant
17. In agriculture, the land area is taken as (d) Variable factors (b) Increases
while number of workers can be increased. constant, .....states that when Labour (c) Decreases
apply the Law of Variable Proportions
situation, it means that the Fixed Factor
If we
in this
of
24.
capital being the same, the MarginalIncreases
Productdecriveiasitynwigtofh
Labour will increase at first but start
(d) First increases,
decreases reaches a maxim
Production is -
(a) Number of workers later. 32. What result we get in the first sta
(b) Land (a) Law of Equi-Marginal ReturnsUtility Variable Proportions?
(c) Units of Output produced (b) Law of Diminishing Marginal (a) Total Product is increasing at an ir
(d) All the above (c) Law of Variable Proportions (b) Average Product increases ont
(d) Law of Constant Returns Point
18. In agriculture, the land area is (c) (a) but not (b)
while number of workers can betaken as constant, 25. When a Factory is working at 70%
increased. If we
apply the Law of Variable Proportions in this
increasing of variable inputs, leads to capadty, (d) Both (a) &(b)
situation, it means that the Variable Factor of (a) Increasing of output 33, Which of the following is true?
Production is - (b) Decreasing of output acCording to the Law o (a) MP does not decrease during th
(a) Number of workers Diminishing Returns (b) TP remains positive during the
(b) Land (c) Increasing of output up to full capacity and later c) AP starts declining after the Pa
(c) Both (a) and (b) decreasing of the Marginal Product
(d) Neither (a) nor (b) the Law of Diminishing Returns according to (d) Allof these
(d) Decreasing of output up to full capacity and 34. AFirm is operating at an output le
19. In the production of wheat, all of the following are later increasing of the output Product is increasing at an inc
variable factors that are used by the farmer implies that the Firm's
(a) The seed and fertilizer used when except - 26. The order of stages in the Law of Variabla
the crop is Proportions are - (a) Marginal Cost must be falli
planted rate
(b) The field that has been cleared of trees and in (a) Increasing Returns, Negative Marginal Returns.
which the crop is planted Diminishing Returns (b) Marginal Product is Increas
rate
(c) The tractor used by the farmer in planting and (b) Increasing Returns, Diminishing Returns, (c) Average Product Is Increasit
cultivating not only wheat but also corn and Negative Marginal Returns
(c) Negative Marginal Returns, Increasing Returns, (d) Both (a) and (c)
barley
(d) The number of hours that the farmer spends in Diminishing Returns
(d) Diminishing Returns, Negative Marginal Returns, 35. Why does the Law of Increasin
cultivating the wheat fields (a) Full Use of Flxed Indivisibl
Increasing Returns
20. If all factors are required to be used in fixed (b) Efficiency of Variable Fact
(27 Which of the following is not a stage in Law df (c) Need to reach the right co
proportions, then the Law of Variable Proportions - Variable Proportions? (d) Allof the above
(a) Will apply (a) Increasing Returns
(b) Will not apply at all L(b) Constant Returns 36. Which of these is a reason f
(c) Both (a) and (b) are true to some extent
(d) Neither (a) nor (b) is true
(c) Diminishing Returns of Increasing Returns?
(d) Negative Returns (a) Specialisation of function
21. As per Law of Variable Proportions, as the quantity (b) Division of Labour
28. The stage of Increasing Returns applies from (c) Effective use of Fixed F
of one input which is combined with other fixed ... to (d) All of the above
inputs is increased, the of the (a) Origin to Point where AP is maximum
Variable Input must eventually decline. (b) Point where AP is maximum to Point when TP s 37. Which of the following is t
(a) Total Productivity maximum of law of increasing returns
(b) Average Productivity (c) Point when TP declines and and MP becomes (a) Fuller utilization of fixe
(c) Marginal Productivity negative. (b) Indivisibility of factor
(d) All the above (d) All the above (c) Greater specialization
(d) All of the abOve
22. The Law of Variable Proportions is drawn under all of 29. In the stage of Increasing Reeturns, Total Product
the assumptions mentioned below except the 38. The stage of Diminish
(TP) -
assumption that (a) Remains constant
(a) The Technology is changing (b) Increases (a) Origin to Point wher
(b) There must be some inputs whose quantity is (b) Point where AP is re
(c) Decreases maxlmum
kept fixed (d) Becomes negative
5.40
 Production Concepts

30, In the stage of Increasing Returns, Average Product (c) Point when TP declines and and MP becomes
(AP) - negative.
(a) Remains constant (d) Allthe above
(b) Increases
(c) Decreases 39. The Law of Diminishing Returns -
(d) Becomes negative (a) States that beyond some level of a variable
input, the Average Product of that variable input
31. Inthe stage of Increasing Returns, Marginal Product begins to increase steadily.
(MP) (b) Assumes that there is technological
(a) Remains constant improvement over time.
(b) Increases (c) States that beyond some level of a variable
(c) Decreases input, the Marginal Product of that Variable
(d) First increases, reaches a maximum and then input begins to decrease steadily.
decreases (d) Informs a Firm whether or not to use afactor
input.
32, What result we get in the first stage of Law of
Variable Proportions? 40. In case of law of variable proportions, diminishing
(a) Total Product is increasing at an increasing rate returns OCCur.
(b) Average Product increases only till Inflexion (a) When units of a variable input are added to a
Point fixed input and total product falls
(c) (a) but not (b) (b) When units of a variable input are added to a
(d) Both (a) &(b) fixed input and marginal product falls
(c) When the size of the plant is increased in the
3. Which of the following is true?
(a) MP does not decrease during the First Stage long run.
(d) When the quantity of the fixed input is increased
(b) TP remains positive during the First Stage and returns to the variable input falls.
(c) AP starts declining after the Point of Inflexion
(d) All of these
41. In the stage of Diminishing Returns, Total Product
34. A
Firm is operating at an output level, where its Total (TP) -
Product is increasing at an increasing rate. This (a) Remains constant
implies that the Firm's (b) Increases
(a) Marginal Cost must be falling at an increasing (c) Decreases
rate (d) Becomes negative
(b) Marginal Product is increasing at a increasing
rate 42. In the stage of Diminishing Returns, Average Product
(c) Average Product is increasing (AP) -
(d) Both (a) and (c) (a) Remains constant
(b) Increases
35. Why does the Law of Increasing Returns operate? (C) Decreases
(a) Full Use of Fixed Indivisible Factors (d) Becomes negative
(b) Eficiency of Variable Factors
(c) Need to reach the right combination 43. In the stage of Diminishing Returns, Marginal
(d) Allof the above Product (MP)
a) First increases, reaches a maximum and then
36. Which of these is areason for the operation of Law decreases
of Increasing Returns? (b) Decreases
(a) Specialisation of functions (c) Increases
(b) Division of Labour (d) Remains constant
(c) Effective use of Fixed Factor of Production
(d) All of the above 44. In the stage of Diminishing Returns
(a) MP increases but AP decreases
37. Which of the following is the reason of the working (b) MP decreases but AP increases
of law of increasing returns? (c) MP and AP show increasing trend
(a) Fuller utilization of fixed factor (d) MP and AP show decreasing trend
(b) Indivisibility of factor
(c) Greater specialization of factor 45. In the stage of Diminishing Returns -
(d) All of the above (a) MP and AP remain positive
38. The stage of Diminishing Returns applies from (b) MP and AP become negative
to......... .... (c) MP is positive but AP becomes negative
(a) Origin to Point where AP is maximum (d) MP becomes negative but AP remains positive
(b) Point where AP is maximum to Point when TP is
maximum

5.41
 46. Which of the oUsiness and Commercial Knowledge - For CA Foundation
Diminishing following statements show the
Returns
Proportions?
(a) under the Law of Stage or 55. When the Law of Diminishing
Returns
(b) Marginal Product is negative Variable (a) Marginal Cost falls ata decreasing sets
r in,
(c) Marginal Product is falling (b) Marginal Cost falls at an
increasing
(c) Marginal Cost falls at a constant raterate
then 64. Ir
Marginal
(d) None Product
of the
and it is
is falling but it is negative (d) Marginal Cost increases
47. Which of above positive
of the Lawtheof following is a 56. Diminishing Marginal Returns implies
reason for the (a) Decreasing Average Variable Costs
(b) InefficiencyDiminishing
(a) operation
of Fixed Returns? (b) Decreasing Marginal Costs
(c) Inadequacy Fixed Indivisible Factors
of (c) Increasing Marginal Costs
(d) Indifferenceofof Fixed Indivisible Factors (d) Decreasing Average Fixed Costs 65.

48. As per the

Indivisible Factors
Immobility Fixed Indivisible 57. The Third Stage of Law of Variable
Factors
becomes Law of
(a) It is inadequateDiminishing- Returns, Fixed Factor
because
as
(a) Law of Negative Returns Proportion is knom
(b) It hasscarce
no
(b) Law of Decreasing Returns
(c) Both (a) perfect (c) Law of Diminishing Returns
(d) Neither and (b) substitutes (d) All of these 66.
(a) nor (b)
49. The "Law of 58. The stage of Negative Marginal
(a) The short
(b) The long
Diminishing
run, but notReturns"
the longapplies to
to
(a) Origin to Point where AP is
Returns
applies om
(c) Both the run, but not the run (b) Point where AP is maximum
(d) Neither the short run and theshort run maximum
maximum to Point when
short run nor thelong run
long run (c) Point when TP declines TP'S
50. and and
Diminishing
(a) When units Returns
of aoccur
negative.
(d) All the above
MP
becomes 67.

fixed
(b) When input
variable input are added to a
and Total 59. In the stage of
Product falls.
units of a variable Negative Marginal Returms, To
fixed input and Marginal input are added to a Product (TP) -
(c) When the size Product falls (a) Remains constant
of the Plant is (b) Increases
long run increased in the (C) Decreases If
(d) When the
and returnsquantity of the fixed input is (d) Remains at zero. Ret
Input falls increased
to the ans
51. Law of Variable 60. In the stage of
(a) All Diminishing Returns is not relevant when Product (AP) - Negative Marginal Returns, Average 68.
labourers are
(b) The Time Period isequally efficient (a) Remains constant
(c) All short
factory inputs are increased by
(b) Decreases
the same (c) Becomes negative
proportion (d) Increases
(d) Technology
52. In which stage of
remains onstant 61. In the stage of 69
Negative Marginal Returns, Marginal
Product and Marginal production
Product
are the Average Product (MP)
(a) Increases
-
decreasing with the
Marginal Product above zero (positive)? (b) Remains constant
(a) In the stage of
(b) In the stage of Constant Returns
(c) Decreases but does
(d) Becomes negative not become negative
(c) In the stage of Decreasing Returns
(d) Both (a)and (c)Increasing Returns 62. Which of the
following
as stage of Negative stages of production is knoWn
53. During the stage of Decreasing (a) When AP is Returns?
(a) AP is negative Returns (b) When MP is Negative
(b) MP is decreasing (c) When MP is decreasing
(c) MP is negative (d) Both (a) and Negative
(b)
(d) Both (a) and (b)
63. The Law of Negative Marginal Returns operates
54. When the Law of Diminishing
Returns because the
Variable Factor is in
(a) Marginal Cost falls at a decreasingoperates
rate
relation to the Fixed Factor of
Production.
(b) Marginal Cost increases (a) Optimal
(c) Marginal Cost falls at a constant rate (b) Adequate
(c) Excessive
(d) Marginal Cost falls at an increasing rate (d) Irrelevant

5.42
 Production Concepts
which of the following situations,
VariableProportions will not apply? the Law of
Improvement in technology
70. Stages I and III are called -
all
(b) When the factors are proportionately varied (a) Economic Absurdity
ic) Where factors must be (b) Economic Stability
oroportions to yield the product used in fixed (c) Economic Equilibrium
above
(d) Allofthe (d) Allof the above
65In which of the following situations, the Law of
71. Stages I and III are called
Variable Proportions wil not apply? (a) Economic Achievement
(a) Long-Run (b) Economic Nonsense
(b) Samelevel of technology (c) Economic Optimality
o Change in proportions in which Factors are used (d) Economic Rationality
(0) Short-Run
72. ARational Producer will not operate in Stage I due
66.In which of the following situations, the Law of to the reason that -
ariable Proportions will not apply? (a) There is more scope for making the best use of
a Scarcity of Fixed Factor of Production the Fixed Factor
(0 Availability of Perfect (b) Total Output still shows an increasing trend
Factor
Substitutes for the Fixed (c) Optimal Combination of Fixed and Variable
A Change in proportions in which Factors are Factors is not yet achieved
used (d) Allof the above
id Same level of technology
of .... MP and AP may rise instead of 73. ARational Producer will not operate in Stage IIdue
67. In case to the reason that -
falling. (a) The Fixed Factor has become over-used and
(a) Constant State of Technology inefficient
(b) Improvenment in Technology (b) There is a reduction in Total Output
o Erosion / Reduction in Technology (c) The MP of the Variable Factor is negative
(d) Allof the above (d) All of the above
r Stage I = Increasing Returns, Stage II = Diminishing 74. A
Rational Producer intends to work in
Rehurns, and Stage II= Negative Marginal Returns, (a) Stage of Constant Returns
answer the next 6 questions. (b) Stage of Increasing Returns
(c) Stage of Diminishing Returns
68. ARational Producer willoperate in - (d) Stage of Negative Returns
(a) Stage I
(b) Stage II 75. In which stage of production would a rational
(0) Stage II entrepreneur like to operate?
(d) All of the above (a) Stage 1 where MP is maximum
(b) Stage 2where both MP and AP are decreasing,
69. ARational Producer willnot operate in but both are positive
(a) StagesIand I (c) Stage 3 where MP is negative
(b) Stages II and III (d) Either Stage 2 or 3
() Stages II and I
(d) All of the above

ANSWERS to MCOs
1 7 8 9 10 11 12 13 14 15 16 17 18 19 20
45 d b b bbb
a b b

2122 23 | 27 28 29 30 31 32 33 34 35 36 37 38I 39 40
2425 26
b b d dbcb
ab c b

41 42 47 48 49 50 51 52 53 54 55 56 57 58 59 60
43 44 45 46 b b bd
b
70 72 73 74 75
71
61 62 63 64 65 66 67 68 69
bdc
bC
 Foundation
Padhuka's Business Economics &Business and Commercial
Knowledge - For CA
SCALE - MCQs
LAW OF RETURNS TO
means that al|
Change in Scale
LAW OF RETURNS TO SCALE
1.) The Lawof Returns to Scale operates in
9.
Production are increased or decreased
proportions
(a) In different proportion
Factors
(a) Medium-run (b) In the same
(c) To infinity
(b) Short -run above
Hc) Long-run (d) None of the
(d) Allof the above is an increase in all
10. When there
2. The concept 'Returns to Scale' is related production together in the same ratio..
increases at first, (b) becomes
factors g
(a)
decreasing Constanta
with
thereafter, and (C) starts
(a) Very short period
(b) Short period
(c) Long period
certain level.
(a) Total Product
beyond
(d) None of the above (b) Average Product
(c) Marginal Product
3. In the , the quantities of all factors of (d) All of the above
production can be increased or decreased
simultaneously. 11. In the initial stages, when there is an
(a) Medium-run
(b) Short run
scale, there is increase
increase in output.in
(a) Zero
L(C) Long-run (b) Proportionate
(d) All of the above (c) Less than proportionate
(d) More than proportionate
4. Long-period production function is related
to
(a) Law of variable proportions (12.) In the initial stages, there will be increasin
(b) Law of returns to scale returns to scale, due to -
(c) Law of dirminishing marginal utility (a) Indivisibility of Factors
(d) None of these (b) Specialisation in Factors
c) Both (a) and (b)
5.) The Law of Returns to Scale deals with - (d) Neither (a) nor (b)
(a) Output Quantities
(b) Monetary Values 13. In the initial stages, there will be increasing
(c) Both (a) and (b) returns to scale, due to -
(d) Neither (a) nor (b) (a) Economies in operations
(b) Diseconomies in operations
6. Under the Law of Returns to Scale, ....is (c) Both (a) and (b)
constant. (d) Neither (a) nor (b)
(a) Output Quantities
(b) Quantities of Variable Factors of Production 14. In the very beginning of production, generaly the
(c) Quantities of Variable and Fixed Factors of Increasing Returns to scale is found because
Production (a) Input is increased
(d) Proportion between different Factors af (b) Plant and Machinery will be new
Production (c) Production Problems are less
(d) Economies of Scale
7. Law of Returns to Scale indicates the
responsiveness of total product when all inputs 15. In a smallscale rubber plant, factors of producu
(a) Remain same like labour, material and capital are increaseo
(b) Are changed drastically 10% and output increases, It implies that the ri
(c) Are changed marginally is experiencing
(d) Are changed proportionately (a) Constant Returns to Scale
(b) Decreasing Returns to Scale
8 Returns to Scale will be said to be in operation (C) Increasing Returns to Scale
when quantity of - (d) Increasing as well as decreasing
(a) All inputs are changed
(b) Allinputs are changed in already established
proportion
(c) Allinputs are not changed
(d) One input is changed while quantity of all
other inputs remains the same

5.44

16. Manufacturers can lower their costs by producing
a variety of different products on the same
equipment. The added volume helps in lowering
average total costs; it may also allow the Firm to
employ different types of equipment that have
lower variable costs. These factors lead to -
(a) Production Economies of Scale
(b) Economies of Scale
(c) Pecuniary Economies of Scale
(d) Technical Economies of Scale
You are given the following data:
Factor
Output
1
15
2 35
3 60
4 92
5 140
17, The above data is an example of:
(a) Decreasing returns to scale.
(b) Constant returns to scale.
(c) Increasing returns to scale.
(d) Positive fixed costs.
18. If as a result of 50% increase in all inputs, the
output rises by 759%, this is a case of:
(a) Increasing Returns to a Factor
(b) Increasing Returns to Scale
(c) Constant Returns to a Factor
(d) Constant Returns to Scale
19. After the initial stages of increasing returns to
scale, the Firm will experience
(a) Still Increasing Returns to Scale
((b))Constant Returns to Scale
(c) Diminishing Returns to Scale
(d) None of the above
20 In which of the following cases does output double
with the doubling of all inputs?
(a) Constant Returns to Scale
(b) Decreasing Returns to Scale
(c) Increasing Returns to Scale
(d) Increasing as well as decreasing returns to
Scale
21. If a change in scale inputs leads to a proportional
change in the output, it is a case of
(a) Increasing Returns to Scale
(b) Constant Returns to Scale
(() Diminishing Returns toScale
(d) Variable Returns to Scale
You are given the following data:
Factor Total Output
0 0
15
2 30
3 45
5.45
Production Concepts
60
5 75
22. The above data is an example of:
(a) Constant Returns to Scale.
(b) Decreasing Returns to Scale.
(c) Increasing Returns to Scale.
(d) Globalization.
23. If one unit of labour and one unit of capital give 200
units of output, two units of labour and two units of
capital give 400 units of output and 5 units of
labour and five units of capital give 1000 units of
output then this is a case of:
(a) Constant Returns to Scale.
(b) Increasing Returns to Scale.
(c) Decreasing Returns to Scale.
(d) All of these.
24. After the stages of constant returns to scale, the
Firm will start experiencing -
(a) Still Increasing Returns to Scale
(b) Constant Returns to Scale
(c) Diminishing Returns to Scale
(d) None of the above
25. If Decreasing Returns to Scale are present, then If
allinputs are increased by 10% then
(a) Output willalso decrease by 10%
(b) Output will increase by 10%
(c) Output willincrease by less than 10%
(d) Output will increase by more than 10%
26. With a view to increase his production Harl Haran
a manufacturer of shoes, Increases all the factors
of production in his unit by 100%. But at the end
of year he finds that instead of an Increase of
100%, his production has increased by only 80%.
Which law of returns to scale is operating in this
case
(a) Increasing returns to scale
(b) Decreasing returns to scale
(c) Constant returns to scale
(d) None of the above
(A) 27. If al inputs are trebled and the resultant output Is
doubled, this is a case of:
(a) Constant returns to scale
(b) Increasing returns toscale
(c) Diminishing returns to scale
(d) Negative returns to scale
28. In electricity generation plants, when the plant
grows too large risks of plant failure with regard to
output increase disproportionately. Hence we are
talking about which concept of returns to scale?
(a) Constant Returns to Scale
(b) Increasing Returns to Scale
Ac) Decreasing Returns to Scale
(d) Balanced Returns to Scale
 Foundation
Knowledge - For CA
Commercial 37. External Economies and Diseconomies arise duet
Padhuka's Business Economics &Business and
29. Linear Homogeneous Production function is based industry-level changes
(a) Overall level
on at the Firm
(a) Increasing Returns to Scale (b) Changesand (b)
(b) Decreasing Returns to Scale (c) Both (a)(a) nor (b)
(c) Constant Returns to Scale (d) Neither
(d) None. 38. External economies can be achieved through-
30. Beyond a certain extent, the Firm will start trade only
experiencing dereasing returns to scale, due to (a) Foreign of transport & transport credit
(b) Extension
(a) Economies in operations facility
(b) Diseconomies in operations Superior managerial skills
(c) Both (a) and (b) (c) External assistance
(d)
(d) Neither (a) nor (b)
Diseconomies may lead to
31. Problems like managerial dificulties, low employee 39. External cost of technology
morale, higher input prices, etc. arising out of Decrease in
(a) External Assistance
large scale operations lead to (b)
(a) Large Economies of Scale (c) Increase in the price of ffactors of production
(b) Pecuniary Economies of Scale (d) None of the above
(c) Real Economies of Scale
(d) Diseconomies of Scale 40. Inventory Economies are a part of which of
following type of economies of scale?
32. Diseconomies of Scale refer to -
(a) Forces which reduce the Average Cost of (a) Production
producing a produt as the Firm expands the (b) Selling
Size of its Plant (c) Labour
(b) Forces which reduce the Marginal Cost of (d) Storage and Transport
producing a product as the Firm expands the
Size of its Plant 41. .economies result from the use df
(c) Forces which increase the Average Cost of specialized equipment and modern techniaues
producing a product as the Firm expands the production.
Size of its Plant (a) Marketing
(d) Forces which increase the Marginal Cost of (b) Selling
producing a product as the Firm the Size of its (c) Managerial
Plant (d) Production
33. Economies and Diseconomies in operations can be 42. Which of the following is an important ingredient
of Selling Economies?
(a) Internal (a) Advertising Economies
(b) External (b) Inventory Economies
c) Both (a) and (b) (c) Transportation Economies
(d) Neither (a) nor (b) (d) Storage Economies
34. Internal Economies and Diseconomies are 43. ......e.conomies are associated with the
dependent on -
(a) Output level of individual Firms distribution of the product ofa Firm.
(b) Output level of the entire industry (a) Manufacturing
(c) Both (a) and (b) (b) Inventory
(d) Neither (a) nor (b) (c) Production
(d) Selling
35. Internal Economies and Diseconomies arise due to
44. Which of the following is not a
Economies of Scale? type of pecuniary
(a) OverallindustryHevel changes
(b) Changes at the Firm level (a) Reduction in prices of raw
(c) Both (a) and (b) materials, as 3
result of discounts due to large volumes roi
(d) Neither (a) nor (b) the Suppliers
(b) Lower costs of external finance as banks ofen
36. External Economies and Diseconomies are offer loans to large Firms at a lower rate
dependent on - interest
(a) Output level of individual Firms (C) Lower advertising rates for large Fims if uer
(b) Output level of the entire industry
(c) Both (a) and (b) advertise at large scales
(d) Economies achieved by increasing the scale of
(d) Neither (a) nor (b) output mainly due to division of labour

5.46
 Production Concepts

A5 Difficulties of management, co-ordination and 53. When a large Firm makes bulk purchase and
control due to bigger Plant Size is an example of obtains its Raw Materials at lower prices than a
(a) Intenal Economies of Scale small size Firm, the large Firm is said to have
b) Internal Diseconomies of Scale achieved -
ic) External Economies of Scale (a) Internal Economies of Scale
(d) External Diseconomies of Scale (b) Internal Diseconomies of Scale
(c) External Economies of Scale
A6 Availability of cheaper Raw Materials and Capital (d) External Diseconomies of Scale
Equipment in the long-run constitutes --
(a) Internal Economies of Scale 54. Internal Economies of Scale can arise in
(b) Internal Diseconomies of Scale aspects.
(c) External Economies of Scale (a) Technological
(d) External Diseconomies of Scale (b) Managerial
(c) Financial
47. Increase in Prices of Factors of Production due to (d) Allof the above
expansion in industry creates -
(a) Internal Economies of Scale 55. Internal and External Economies and
(b) Intenal Diseconomies of Scale Diseconomies of Scale has its impact on
(c) Extermal Economies of Scale (a) Long Run Average Cost (LAC) Curve
(d) External Diseconomies of Scale (b) Short Run Average Cost (SAC) Curve
(c) Both (a) and (b)
48. Discovery of new technical knowledge and (d) Neither (a) nor (b)
improvements in tedhnology leads to -
(a) Internal Economies of Scale 56. Due to External Economies of Scale, the Long Run
(b) Internal Diseconomies of Scale Average Cost (LAC) Curve -
(c) External Economies of Scale (a) Shifts inward
(d) External Diseconomies of Scale (b) Remains constant
(c) Shifts outward
49. Management Efficiency and Productivity due to (d) Is not affected at all
creation of different specialised functional
57.) Due to External Diseconomies of Scale, the Long
departments is an example of - Run Average Cost (LAC) Curve -
(a) Internal Economies of Scale (a) Shifts inward
(b) Internal Diseconomies of Scale (b) Remains constant
(c) External Economies of Scale (c) Shifts outward
(d) External Diseconomies of Scale (d) Is not affected at all
50. Growth of Anillary Industries supplying related 58. If the LAC curve falls as output expands, this is
goods and services is an example of due to -
(a) Internal Economies of Scale (a) Law of Diminishing Returns
(b) Internal Diseconomies of Scale tb) Economies of Scale
(c) External Economies of Scale (c) Law of Variable Proportions
(d) External Diseconomies of Scale (d) Diseconomies of Scale

51. Delays in internal communication due to complex
management structure is an example of -
(a) Internal Economies of Scale
(b) Internal Diseconomies of Scale
(c) External Economies of Scale
(d) External Diseconomies of Scale
52. A large Firm can offer better security to Bankers and
obtain credit easily. This creates for such Firm.
(a) Internal Economies of Scale
(b) Internal Diseconomies of Scale
(c) External Economies of Scale
(d) Externai Diseconomies of Scale
59. Identify the correct statement
(a) Average Product is at its maximum when
Marginal Product is equal to Average Product
(b) Law of Increasing Returns to Scale relates to
the effect of changes in factor proportions
(c) Economies of Scale arise only because of
invisibilities of factor proportions
(d) Internal Economies of scale can accrue only to
the exporting sector
60. The Economy achieves Productive Eficiency
when:
(a) The best quality goods are produced.
(b) The highly skillful resources in the country are
fully employed.
(c) All resources are utilized and goods &services
are produced at least cost.
(d) None.

5.47
 Fachuia s Business Economics &Business and Commerdal Knowiedge - For CA Foundation
ANSWERS to MCQS
14 15 16 17 18 19
23 6 10 11 12 13
b C b b
20
a a b c C a d C

33 34 35 36 37 38 39C 40
21Z2 23 24 25 26 27 28 29 30 31 32
b b a b a
a c b d

51 52 53 54 55 56 57 58 59 60
4 1 2 4344 45 46 47 48 49 50
a b a
d c a b a a d a