Production Function and Returns to a Factor MCQ — Class 11

Production function

Production function: the technical relationship between physical inputs and maximum output obtainable with given technology

Short run

Short run: a period in which at least one factor of production is fixed

Long run

Long run: a period long enough for all factors of production to be variable

Total product

Total product: the total output produced by all units of the variable factor with given fixed factors

Marginal product

Marginal product: the change in total product caused by employing one additional unit of the variable factor

Average product

Average product: total product per unit of the variable factor

Increasing returns to a factor

Increasing returns to a factor: the initial phase where marginal product rises as more units of the variable factor are combined with fixed factors

Diminishing returns to a factor

Diminishing returns to a factor: the phase where marginal product remains positive but declines as more variable factor is added to fixed factors

Negative returns to a factor

Negative returns to a factor: the phase where marginal product becomes negative and total product falls

AP–MP relation

AP–MP relation: AP rises when MP is above AP, is maximum when MP equals AP, and falls when MP is below AP

1. Which concept best matches this situation? A firm relates labour and capital inputs to units of output.

1. Short run
2. Production function
3. Total product
4. Increasing returns to a factor

2. Which concept best matches this situation? Plant size is fixed while labour hours can be changed.

1. Long run
2. Marginal product
3. Short run
4. Diminishing returns to a factor

3. Which concept best matches this situation? The firm can change both plant capacity and labour.

1. Total product
2. Average product
3. Negative returns to a factor
4. Long run