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CUET Economics 2025 PYQs31 May Shift 1. Free, no login required.

Micro

past year questions, CUET Economics 2025 31 May Shift 1

Production & Costs

past year questions, Micro, CUET Economics 2025 31 May Shift 1

Easy

Comprehension:

Read the passage carefully and answer the questions based on the passage:

Law of Variable Proportion and Return to Scale.

The law of variable proportions arises because factor proportions change as long as one factor is held constant and the other is increased. What if both factors can change? Remember that this can happen only in the long run. When a proportional increase in all inputs results in an increase in output by the same proportion, the production function is said to display Constant returns to scale (CRS).

When a proportional increase in all inputs results in an increase in output by a larger proportion, the production function is said to display Increasing Returns to Scale (IRS). Decreasing Returns to Scale (DRS) holds when a proportional increase in all inputs results in an increase in output by a smaller proportion.

When output increases with the larger proportion compare to increase in inputs, this return is called?

  1. Decreasing Return to scale.
  2. Increasing return to scale.
  3. Constant Return to scale.
  4. Diminishing Marginal Product.

Solution

✅ Correct Option: 2

Option 1 -> Occurs when output increases by a smaller proportion than inputs.

Option 2 -> Occurs when output increases by a larger proportion than inputs.

Option 3 -> Occurs when output increases by the same proportion as inputs.

Option 4 -> Refers to declining additional output from one variable input while others are fixed.

Hence, Increasing return to scale -> This is a long-run production concept where when all inputs are increased by a certain proportion, output increases by a larger proportion. For example, if a firm doubles all its inputs (labor, capital, materials) and output more than doubles (say, triples), the firm experiences increasing returns to scale. This often occurs due to specialization, efficient use of indivisible inputs, and economies of scale. -> correct

More from this set:

Question 41

The core reason behind the arising law of proportion is............

  1. Factor proportion changes with keeping one factor constant.
  2. Decrease in all input.
  3. Increase in all input.
  4. All factors remain constant.

Question 42

When output increases with smaller proportion compare to increase in inputs, this return is called?

  1. Decreasing Return to scale
  2. Increasing Return to scale.
  3. Constant Return to scale.
  4. Incremental Productivity.

Question 43

Suppose in a production process, all inputs get doubled. As a result, if the output gets doubled, the production function exhibits?

  1. Decreasing Return to scale.
  2. Incresing Returns to scale.
  3. Constant Return to scale.
  4. Decresing Productivity.

Question 44

When output increases with the same proportion as increase in inputs, this concept is known by?

  1. Marginal diminishing returns.
  2. Decreasing return to scale.
  3. Increasing return to scale.
  4. Constant Return to scale.

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