Production Function and Returns to a Factor
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Q1
The stage of Law of variable proportion relevant for firm aiming at maximum efficiency is
Marks:1Answer:
second stage.
Explanation:
Maximum efficiency can be achieved at second stage where TP increases at a decreasing rate and MP starts falling but remains positive.

Q2
Law of variable proportion is based on the fact that output is increased by
Marks:1Answer:
varying quantity of variable factor.
Explanation:
Law of variable proportion is based on the fact that as we go on applying more and more units of a variable factor with fixed factors, the total output initially increases at an increasing rate but beyond a certain point, it increases at a diminishing rate and finally falls.

Q3
The general shape of MPP curve is
Marks:1Answer:
inverse U shape.
Explanation:
MPP is inverse Ushaped indicating that marginal product first increases then becomes constant and after that starts falling, when an additional product is produced.

Q4
Some factors of production are fixed and others are variable in the
Marks:1Answer:
short period.
Explanation:
In the short run some factors of production are fixed and others are variable. Whereas in the long run all factors become variable. Thus production can be increased only to some extent in the short period.

Q5
The functional relationship between physical input and physical output of a commodity is called
Marks:1Answer:
production function.
Explanation:
Symbolically, production function can be written as: Q = f(F_{1}, F_{2},….F_{n}) where, Q= output and F_{1}, F_{2},….F_{n }represents various factors of production.