NCERT Class 12 Economics Chapter 3 Production and Costs Extra Questions and Answers
Class 12 Economics Chapter 3 Extra Inside Questions and Answers – Production and Costs. Here in this Page Class XII Students can Learn Extra Questions & Answer 3rd Chapter Economics fully Inside.
We Provided Here Production and Costs Economics Chapter 3 Long Answer Type Question, MCQ Questions & Answer, Short Answer Type Questions (2 or 3 marks), and Very Short answer Type Question (1 marks) Solution.
Class 12 Economics Chapter 3 Inside based Question
Economics Chapter 3 Production and Costs Class 12 Inside 5 Marks, 3 marks, 2 Marks & And 1 Marks Important Questions and Answers.
1.) what is short run and long run ?
Ans-In the short run, we cannot varied factory labour and capital therefore remainsconstant. In order to vary the output level, the firmcan vary only the other factor. The factor that remains fixed is called the fixedfactor whereas the other factor which the firm can vary is called the variablefactor.In the long run, all factors of production can be varied. A firm in order toproduce different levels of output in the long run may vary capital and laboursimultaneously. So, in the long run, there is no fixed factor.
2.) Define Total product , Average product, Marginal product .
Ans – i. Total product -we vary a single input and keep all other inputs constant. Thenfor different levels of that input, we get different levels of output. Thisrelationship between the variable input and output, keeping all other inputsconstant, is often referred to as Total Product (TP) of the variable input.ii. Average product -Average product is defined as the output per unit of variable input.
iii. Marginal product -Marginal product of an input is defined as the change in output per unit ofchange in the input when all other inputs are held constant.
3.) Why MP and AP curve ‘U’ shape?
Ans -According to the law ofvariable proportions, themarginal product of an input
initially rises and then after acertain level of employment, itstarts falling. The MP curvetherefore, looks like an inverse‘U’-shaped curve. For the first unitof the variable input the MP and the AP are same. Now as we increasethe amount of input, the MP rises.AP being the average of marginalproducts, also rises, but rises lessthan MP. Then, after a point, the MPstarts falling. However, as long asthe value of MP remains higherthan the value of the AP, the APcontinues to rise. Once MP hasfallen sufficiently, its value becomesless than the AP and the AP alsostarts falling. So AP curve is alsoinverse ‘U’-shaped.
4.) Explain CRS, IRS, DRS.
Ans -i.) When a proportional increase in all inputs results in an increase in outputby the same proportion, the production function is said to display Constantreturns to scale (CRS).
ii.) When a proportional increase in all inputs results in an increase in outputby a larger proportion, the production function is said to display IncreasingReturns to Scale (IRS).
iii.) Decreasing Returns to Scale (DRS) holds when a proportional increase inall inputs results in an increase in output by a smaller proportion.
5.) When the average cost falls asthe firm increases output.
Ans -IRS implies that if we increase all the inputs by a certain proportion, outputincreases by more than that proportion. In other words, to increase output by acertain proportion, inputs need to be increased by less than that proportion.With the input prices given, cost also increases by a lesser proportion. For example,suppose we want to double the output. To do that, inputs need to be increased,but less than double. The cost that the firm incurs to hire those inputs thereforealso need to be increased by less than double.It must be thecase that as long as IRS operates, average cost falls asthe firm increases output.
6.) At which point LRMC curve cut the LRAV curve .
Ans – For the first unit of output,both LRMC and LRAC are the same. Then, as output increases, LRAC initiallyfalls, and then, after a certain point, it rises. As long as average cost is falling,marginal cost must be less thanthe average cost. When theaverage cost is rising, marginalcost must be greater than theaverage cost. LRMC curve istherefore a ‘U’-shaped curve. Itcuts the LRAC curve from belowat the minimum point of theLRAC.
7.) The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
8.) The following table gives the average product schedule of labour. Find the total product and marginal product schedules. It is given that the total product is zero at zero level of labour employment.
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