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CUET Economics 2025 PYQs3 June Shift 2. Free, no login required.

Micro

past year questions, CUET Economics 2025 3 June Shift 2

Production & Costs

past year questions, Micro, CUET Economics 2025 3 June Shift 2

Medium

When a firm increases its output and the average cost rises, this phase in the production process is shown as?

Solution

✅ Correct Option: 4

Option 1 -> Returns to Scale is a general concept describing the relationship between input changes and output changes, not specifically indicating rising average costs.

Option 2 -> Constant returns to scale occurs when output increases proportionally with inputs and average cost remains unchanged, not rising.

Option 3 -> Increasing Returns to Scale happens when output grows more than proportionally to input increases, causing average cost to fall, not rise.

Option 4 -> Decreasing Returns to Scale occurs when output increases less than proportionally to input increases, causing average cost to rise.

Hence, Decreasing Returns to Scale -> When a firm experiences decreasing returns to scale, increasing all inputs by a certain percentage results in output increasing by a smaller percentage. This means the firm needs proportionally more resources to produce each additional unit, which drives up the average cost per unit. This phase typically occurs when a firm becomes too large and faces inefficiencies such as coordination problems, communication difficulties, or management challenges. -> correct

Related questions:

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In the production of clothes, cotton is defined as................

  1. capital
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(A) Technological progress leads to a decrease in the supply of a commodity.

(B) When the price of inputs rises, the supply curve of the good shifts to the left.

(C) Technological progress shifts the supply curve of the firm to the right.

(D) Imposition of a unit tax on a firm shifts the supply curve of the goods produced by the firm to the left.

Choose the correct answer from the options given below:

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The tendency where marginal productivity first increases then starts falling is known as ______

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  1. The price must equal to MC.
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  3. Price must be less than the average cost.
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2025: 28 May Shift 1

Arrange the following statements considering the shape of long run marginal costs (LRMC).

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(B) For the first unit of output, both LRMC and LRAC are the same.

(C) After a certain point, LRAC rises (MC > AC).

(D) LRMC curve is therefore a 'U'-shaped curve.

Choose the correct answer from the options given below:

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  2. (B), (A), (C), (D)
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The collection of all possible combinations of goods and services that can be produced from a given amount of resources and a given stock of technological knowledge.

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