TN STATEBOARD 11th ECONOMICS CHAPTER 3
TEST
PRODUCTION ANALYSIS CHAPTER TEST
TEST 3
PADVIKSHA BLOG
TOTAL MARKS: 25
TIMINGS: 1 HOUR 15 MINS
I Multiple Choice Questions (MCQ) (Mark- 5 x 1 = 5)
Write all questions
FILL IN THE BLANS
1. If a rise in price is anticipated in future, present supply Decrease.
2. When input increases by 10% and Output increases by 10% CONSTANT.
3. AP = ? TP/N
4. What is production minus consumption called? Saving.
5. What is a combination of inputs which show same amount of cost called Iso cost line.
II Very short answer questions. (5x2=10)
Write 3 questions
1. Define labour?
1. Labour is the active factor of production.
2. In common parlance, labour means manual labour or unskilled work. But in Economics the term 'labour' has a wider meaning.
3. It refers to any work undertaken for securing an income or reward. Such work may be manual or intellectual. For example, the work done by an agricultural worker or a cook or rickshaw puller or a mason is manual.
4. The work of a doctor or teacher or an engineer is intellectual.
5. In short, labour in economics refers to any type of work performed by a labourer for earning an income.
2. What are the characteristics of capital? Any 2
Answer:
Capital is a man-made factor
Capital is mobile between places and persons
Capital is a passive factor of production
Capital’s supply is elastic
Capital’s demand is a derived demand
Capital is durable
3. Define Marginal Product of a factor?
Answer. It is the addition or the increment made to the total product when one more unit of the variable input is employed. In other words, it is the ratio of the change in the total product to the change in the units of the input.
It is expressed as MP = ATP/AN
Where MP = Marginal Product ATP = Change in total product AN = Change in units of input It is also expressed as MP = TP [n] —TP [n-1] MP = Marginal product TP [n] = Total product of employing nth unit of a factor. TP [n — 1] = Total product of employing the previous unit of a factor, that is,
[n — 1]th unit of a factor.
4. What is average product?
Answer:
Average product refers to the output per unit of the input.
5. What are Iso-quants?
Answer:
An Iso-quant curve can be defined as the locus of points representing various combinations of two inputs yielding the same output.
III Short answer questions. (3 X 5 = 15)
Write 3 questions
1. Differentiate the short period and long period.
Answer:
The short-run is the period where some inputs are variable. Another feature is that firms do not enter or exit the industry. The long-run is the period where all the inputs are variable. It is featured by the entry of new firms and the exit of existing firms from the industry.
2. Define Iso – quant, and Iso – quants Assumptions?
Answer:
Definition of Iso – quant:
According to Ferguson, “An Iso – quant is a curve showing all possible combinations of inputs physically capable of producing a given level of output”.
Assumptions:
It is assumed that only two factors are used to produce a commodity.
Factors of production can be divided into small parts.
The technique of production is constant.
The substitution between the two factors is technically possible. That is, the production function is of “variable proportion” type rather than a fixed proportion.
Under the given technique, factors of production can be used with maximum efficiency.
3. State and explain the elasticity of supply.
Answer. The elasticity of supply may be defined as the degree of responsiveness of change in supply to change in price on the part of sellers.
Mathematically
4. What are the factors governing elasticity of supply?
Answer
1. Nature of the commodity. The elasticity of supply of durable goods are high but perishables have low elasticity of supply.
2. Cost of production: Under constant or increasing returns the elasticity of supply is greater, under diminishing returns elasticity is less.
3. Technical condition: In large scale production supply cannot be adjusted easily. So elasticity of supply is lesser and vice versa.
4. Time factor: During very short period, supply cannot be adjusted. In short period, variable factors can be changed so elasticity is more and in long period, supply is highly elastic.
5. What is an Iso-quant map?
Answer:
An Iso-quant map has different Iso-quant curves representing the different combinations of factors of production, yielding the different levels of output. An Iso-quant map is a family of Iso-quants..
IV. Long Answer question (2 x 5 = 10)
Write any 1 question.
1. Explain the law of supply with a diagram.
Answer:
1. Law of supply:
The Law of supply describes a direct relationship between the price of a good and the supply of that good.
2. Definition:
“Other things remaining the same, if the price of a commodity increases its quantity supplied increases and if the price of a commodity decreases, quantity supplied also decreases”.
3. Supply function:
Q = f (Px, Pr, Pr T, O, E)
Qs – Quantity supplied of x commodity
Px – Price of x commodity
Pr – Price of related goods
Pf – Price of factors of production.
T – Technology
O – Objective of the producer.
E – Expected price of the commodity
Assumptions:
There is no change in the prices of factors of production and capital goods.
Natural resources, technology, climate, political situations and tax policy remain unchanged.
Prices of substitutes are constant.
Supply schedule:
A supply schedule shows the different quantities of supply at different prices
Supply curve:
The quantum supplied is represented on X axis. And the price of the commodity is represent on the Y axis
As the price of the commodity increases, the quantum supplied of the commodity also increases. Thus the supply curve has a positive slope. The points such as e, d, c, b and a on the supply curve SS, represent various quantities of different prices.
2. Elucidate the Laws of Returns to Scale.
Answer. In the long-run all factors are variable. The laws of returns to scale explain the relationship between output and the scale of inputs in the long-run when all the inputs are increased in the same proportion. Assumptions :
1. All the factors are variable except the organization. 2. There is no change in technology. 3. There is perfect competition in the market 4. Outputs or returns are increased in physical quantities.
Three phases of returns to scale: 1. Increasing returns to scale: If all inputs are increased by one percent output increase by more than one percent.
2. Constant returns to scale: In this case, if all inputs are increased by one percent output increases by one percent. Diagrammatic Illustration:
In the diagram, the movement from point a to point b represents increasing returns to scale. Between these two points, input has doubled but the output was tripled.
The law of constant returns is implied by the movement from point b to point c, between these two points inputs have doubled and output also has doubled.
Decreasing returns to scale are denoted by the movement from the point c to point d since doubling the factors from 4 units to 8 units produce less than the increase in inputs that is by only 33.33%.