NCERT Solution Economics Class 12 Chapter 3 Production and Costs
NCERT Solution Economics Class 12 Chapter 3 Production and Costs all questions and answers. Economics Class 12 3rd Chapter Production and Costs exercise solution and experts answer. As one of online learning platforms, we (netex.) are excited to offer the NCERT Solution Economics Class 12 Chapter 3. This solution is designed to help students who are looking to brush up on their physics concepts on Chapter 3 Production and Costs.
1.) Explain the concept of production function.
Ans-The production function of a firm is a relationship between inputsused and outputproduced by the firm. For various quantities ofinputs used, it gives the maximum quantityof output that can beproduced.for example we assumed that the farmer uses only twoinputs for produce wheat -i.land ii.labour .The production function tell us that he canproduce maximum amount of wheat can produce for a given amount of land that he usesand a given number of hours of labour that he performs . Support that he uses 2 house oflabour per day and 1 hectare of land to produce maximum of 2 tonnes of wheat. Then thisrelation of input and output called production function.
2.) What is the total product of an input?
Ans-we vary a single input and keep all other inputs constant. Thenfor different levels ofthat input, we get different levels of output. Thisrelationship between the variable inputand output, keeping all other inputsconstant, is often referred to as Total Product (TP) of the variable input.
3.) What is the average product of an input?
Ans-Average product is defined as the output per unit of variable input.
4.) What is the marginal product of an input?
Ans-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.
5.) Explain the relationship between the marginal products and the total productof aninput.
Ans -In the case of total product of input we only change a single input and keep all other inputs constant then for different levels of that input we get different levels of output .This relationship between the variable input and output keeping all other inputs constant it is total product.In case of marginal product of an input we change in output per unit of change in the input when all other inputs are held constant. In both case we only change single input and held all other constant.
6.) Explain the concepts of the short run and the long run.
Ans -In the short run only one of the factor – labour or capital – cannot bevaried, andtherefore remains fixed. In order to vary the output level, the firmcan vary only the otherfactor. The factor that remains fixed is called the fixedfactor whereas the other factor whichthe firm can vary is called the variablefactor. In the long run, all factors of production canbe varied. A firm in order toproduce different levels of output in the long run may vary boththe inputssimultaneously. So, in the long run, there is no fixed factor.For any particular production process, long run generally refers to a longertime period than the short run.
7.) What is the law of diminishing marginal product?
Ans- The tendency of the marginal product to first increase and then fall is called the law ofdiminishing marginal product. Law ofdiminishing marginal product say that the marginalproduct of a factor input initiallyrises with its employment level. But after reaching a certain level of employment,it starts falling.
8.) What is the law of variable proportions?
Ans-The tendency of the MP to first increase and then fall is called the law of variable proportions. Law of variable proportions say that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment,it starts falling.In order to understand this first defineof factor proportions. Factor proportions represent the ratio in which the twoinputs are combined to produce output.Aswe hold one factor fixed and keep increasing the other, the factorproportions change.Initially, as we increase the amount of the variable input,the factor proportions becomemore and more suitable for the production andmarginal product increases. But after certainlevel of employment, theproduction process becomes too crowded with the variable input.
9.) When does a production function satisfy constant returns to scale?
Ans- The law of variable proportions arises because factor proportions change aslong asone factor is held constant and the other is increased.If both factorschange Remember thatthis can happen only in the long run. One specialcase in the long run occurs when both factors are increased by the sameproportion, or factors are scaled up.When a proportionalincrease in all inputs results in an increase in outputby the same proportion, the productionfunction is said to display Constantreturns to scale .
10.) When does a production function satisfy increasing returns to scale?
Ans – The law of variable proportions arises because factor proportions change aslong asone factor is held constant and the other is increased. if both factorschange Remember thatthis can happen only in the long run. One specialcase in the long run occurs when bothfactors are increased by the sameproportion, or factors are scaled up.When a proportional increase in all inputs results in an increase in outputby a larger proportion, the production function is said to display Increasing returns to scale.
11.) When does a production function satisfy decreasing returns to scale?
Ans- The law of variable proportions arises because factor proportions change aslong asone factor is held constant and the other is increased. If both factorschange Remember thatthis can happen only in the long run. One specialcase in the long run occurs when bothfactors are increased by the sameproportion, or factors are scaled up.Decreasing Returnsto Scale (DRS) holds when a proportional increase inall inputs results in an increase in output by a smaller proportion.
13.) What are the total fixed cost, total variable cost and total cost of a firm? How are they related?
Ans- In the shortrun, some of the factors of production cannot be varied, and therefore,remain fixed. The cost that a firm incurs to employ these fixed inputs iscalled the total fixed cost . Whatever amount of output the firm produces this cost remains fixed for the firm. To produce any required level of output the firm in short run can only adjust variable inputs.According the cost that a firm incurs to employ there variable inputs is called the total variable cost. Adding the fixed and the variable costs we get the total cost of the firm.
14.) What are the average fixed cost, average variable cost and average cost of afirm? How are they related?
Ans-the average variable cost (AVC) is defined as the variable cost as per unit of output.Theaverage fixed cost is defined as the fixed cost per unit of output. The average cost of firm isdefined as the total cost of as per unit of output.In the short run, fixed costcannot bechanged. When we change the level of output, whatever change occurs to total cost is entirely due to the change in total variable cost. So in the shortrun, marginal cost is the increase in TVC due to increase in production of one extra unit of output. This results in anincreasein total variable cost, and hence, anincrease in total cost. Therefore, asoutputincreases, total variable cost and total cost increase. Total fixed cost, however, isindependent of theamount of output produced andremains constant for all levels of production.
15.) Can there be some fixed cost in the long run? If not, why?
Ans – In long run there is no fixed cost in long run because In the long run all factors of production can be varied. A firm in order to produce different levels of output in long runmay vary both the input. So in long run there is no fixed factory.The cost that a firm incursto fixed inputs is called fixed cost . But in long there is no fixed factory.
16.) What does the average fixed cost curve look like? Why does it look so?
Ans -The average cost curve is a rectangular hyperbola .Average fixed cost (AFC) is the ratioof total fixed cost (TFC) to q. TFC is a constant .Therefore as q increase AFC decrease. Whenoutput is very close to zero, AFC is arbitrarily large, and asoutput moves towards infinity,AFC moves towards zero. AFC curve is rectangular hyperbola.
17.) What do the short run marginal cost, average variable cost and short runaverage cost curves look like?
Ans – In short run marginal cost, average variable cost and short run average cost curve looklike “U”shape.
18.) Why does the SMC curve cut the AVC curve at the minimum point of the AVC
curve?
Ans- According to the law of variable proportion. Initially at the first unit of output, it iseasy to check that SMC and AVC are the same. So both SMC and AVC curvesstart from thesame point. Then, as output increases, SMC falls. AVC being theaverage of marginal costs,also falls, but falls less than SMC. Then, after a point,SMC starts rising. AVC, however,continues to fall as long as the value of SMCremains less than the prevailing value ofAVC.Once theSMC has risen sufficiently,its value becomes greater than the value of AVC.The AVC then starts rising. TheAVC curve is therefore ‘U’-shaped.As long as AVC is falling,SMC must be less than the AVC. As AVC rises,SMC must be greater than the AVC. So theSMC curve cuts the AVC curve frombelow at the minimum point of AVC.
20.) Why is the short run marginal cost curve ‘U’-shaped?
Ans- Accordingto the law of variable proportions,initially, the marginal product of afactor increases as employmentincreases, and then after a certainpoint, it decreases. This meansinitially to produce every extra unitof output, the requirement of thefactor becomes lessand less, andthen after a certain point, it becomesgreater and greater. As a result, withthefactor price given, initially theSMC falls, and then after a certainpoint, it rises. SMC curve is,therefore, ‘U’-shaped.
21.) What do the long run marginal cost and the average cost curves look like?
Ans- The long run marginal cost and average cost curve look like U shaped . The reason behind them being U-shaped is due to the law of returns to scale.
22.) The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
L | TPL |
0 | 0 |
1 | 15 |
2 | 35 |
3 | 50 |
4 | 40 |
5 | 48 |
ANS.
L | TPL | AP | MP |
0 | 0 | – | – |
1 | 15 | 15 | 15 |
2 | 35 | 17.5 | 20 |
3 | 50 | 16.67 | 15 |
4 | 40 | 10 | -10 |
5 | 48 | 9.6 | 8 |
In case you are missed :- Previous Chapter Solution
23.) 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.
L | APL |
1 | 2 |
2 | 3 |
3 | 4 |
4 | 4.25 |
5 | 4 |
6 | 3.5 |
ANS.
L | APL | TPL | MPL |
1 | 2 | 2 | 2 |
2 | 3 | 6 | 4 |
3 | 4 | 12 | 6 |
4 | 4.25 | 17 | 5 |
5 | 4 | 20 | 3 |
6 | 3.5 | 21 | 1 |
24.) The following table gives the marginal product schedule of labour. It is also given that total product of labour is zero at zero level of employment. Calculate the total and average product schedules of labour.
L | MPL |
0 | 10 |
1 | 30 |
2 | 45 |
3 | 55 |
4 | 70 |
5 | 90 |
6 | 120 |
ANS.
L | MPL | TPL | APL |
0 | 0 | – | – |
1 | 3 | 3 | 3 |
2 | 5 | 8 | 4 |
3 | 7 | 15 | 5 |
4 | 5 | 20 | 5 |
5 | 3 | 23 | 4.6 |
6 | 1 | 24 | 4 |
25.) The following table shows the total cost schedule of a firm. What is the total fixed cost schedule of this firm? Calculate the TVC, AFC, AVC, SAC and SMC schedules of the firm.
Q | TC |
1 | 10 |
1 | 30 |
2 | 45 |
3 | 55 |
4 | 70 |
5 | 90 |
6 | 120 |
ANS.
Q | TC | TFC | TVC | AFC | AVC | SAC | SMC |
0 | 10 | 10 | 0 | – | – | – | – |
1 | 30 | 10 | 20 | 10 | 20 | 30 | 20 |
2 | 45 | 10 | 35 | 5 | 17.5 | 22.5 | 15 |
3 | 55 | 10 | 45 | 3.33 | 15 | 18.33 | 10 |
4 | 70 | 10 | 60 | 2.5 | 15 | 17.5 | 15 |
5 | 90 | 10 | 80 | 2 | 16 | 18 | 20 |
6 | 120 | 10 | 110 | 1.67 | 6.875 | 8.545 | 30 |
26.) The following table gives the total cost schedule of a firm. It is also given that the average fixed cost at 4 units of output is Rs 5. Find the TVC, TFC, AVC, AFC, SAC and SMC schedules of the firm for the corresponding values of output.
Q | TC |
1 | 50 |
2 | 65 |
3 | 75 |
4 | 95 |
5 | 130 |
6 | 185 |
ANS.
Q | TC | TVC | TFC | AVC | AFC | SAC | SMC |
1 | 50 | 30 | 20 | 30 | 20 | 50 | 30 |
2 | 65 | 45 | 20 | 22.5 | 10 | 32.5 | 15 |
3 | 75 | 55 | 20 | 18.33 | 6.66 | 25 | 10 |
4 | 95 | 75 | 20 | 18.75 | 5 | 23.75 | 20 |
5 | 130 | 110 | 20 | 22 | 4 | 26 | 35 |
6 | 185 | 165 | 20 | 27.5 | 3.33 | 30.83 | 55 |
27.) A firm’s SMC schedule is shown in the following table. The total fixed cost of the firm is Rs 100. Find the TVC, TC, AVC and SAC schedules of the firm.
Q | TC |
0 | – |
1 | 500 |
2 | 300 |
3 | 200 |
4 | 300 |
5 | 185 |
6 | 800 |
ANS.
Q | SMC | TFC | TVC | TC | AVC | SAC |
0 | – | 100 | 0 | 100 | – | – |
1 | 500 | 100 | 500 | 600 | 500 | 600 |
2 | 300 | 100 | 800 | 900 | 400 | 450 |
3 | 200 | 100 | 1000 | 1100 | 333.33 | 366.67 |
4 | 300 | 100 | 1300 | 1400 | 325 | 350 |
5 | 500 | 100 | 1800 | 1900 | 360 | 380 |
6 | 800 | 100 | 2600 | 2700 | 433.33 | 450 |
28.) Let the production function of a firm be
Q=5 L1/2 K1/2
Find out the maximum possible output that the firm can produce with 100 units of L and 100 units of K.
ANS.
Q=5 L1/2 K1/2
L=100 units of labour
K=100 units of capital
Q=(100)1/2 (100)1/2
Q=5(10)(10)
Q=500 units.
29.) Let the production function of a firm be Q = 2L2K2 Find out the maximum possible output that the firm can produce with 5 units of L and 2 units of K. What is the maximum possible output that the firm can produce with zero unit of L and 10 units of K?
ANS.
L=5 units of labour
K=2 units of capital
Q=2(5)2 (2)2
Q=2(25)(4)
Q=200 units
AFTER THAT
L=0 units k=100 units
Q=2(0)2 (100)2
Q=2(0)(10000)
Q=0*10000
Q=0
30.) Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q = 5L + 2K.
ANS.
Q=5L+2K
L=0 K=10
Q=5(0)+2(10)
Q=20 units.
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