Question

In the short run in production a firm:

a.has at least one fixed input

b.can only change one input

c.has at most one variable input

d.can change all of its inputs

A firm’s production function describes the relationship between

a.inputs and cost of production

b.inputs and output

c.output and cost

d.output and revenue

If a firm’s expansion path curves upward at an increasing rate, this implies

a.it uses proportionately more labor than capital as output expands

b.its costs will be increasing at an increasing rate as output expands

c.its production function exhibits increasing returns to scale

d.it uses proportionately more capital than labor as output expands

Answer 1

Answer-1. Correct option is 'c'

In the short run in production a firm has at most one variable input. Production is the process a firm uses to transform inputs. Thus in the short run the only way to change output is to change the variable inputs ( Example- Labour). Marginal product is the additional output a firm obtains by employing more labout in production.

Answer-2. Correct option is 'b'

A firm's production function describes the relationship between the quantity of inputs and the quantity of outputs it produces. The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs.

Answer-3 Correct option is 'c'

If a firm’s expansion path curves upward at an increasing rate, this implies its production function exhibits increasing returns to scale. A firm using labor and capital as the only inputs, if the total output increases by more than 2 when we double both labor and capital, then the production function has increasing returns to scale.