CUET Economics - Micro - Production & Costs | Free Questions - Page 7

Q1:

2025: 15 May Shift 1

Micro

>

Production & Costs

Medium

Choose the incorrect option from the following with reference to production in the short run.

The law of variable proportions is applicable.

The firm can change more than one factor in short run.

The firm experiences returns to a factor.

The law of diminishing marginal returns is applicable.

Correct Answer

Option 2

Correct Answer

Explanation

Q2:

2025: 15 May Shift 1

Micro

>

Production & Costs

Medium

Consider a production function $q = f (x_1, x_2)$ where the firm produces q amount of output using $x_1$ amount of factor 1 and $x_2$ amount of factor 2. Now suppose the firm decides to increase the employment level of both the factors t (t > 1) times.

Identify the correct statement from the following.

$f(tx_1, tx_2) = tf(x_1, x_2)$ implies constant returns to scale.

$f(tx_1, tx_2) > tf(x_1, x_2)$ implies decreasing returns to scale.

$f(tx_1, tx_2) < tf(x_1, x_2)$ implies increasing returns to scale.

$f(tx_1, tx_2) = f(x_1, x_2)$ implies constant returns to scale.

Correct Answer

Option 1

Correct Answer

Explanation

Q3:

2025: 14 May Shift 1

Micro

>

Production & Costs

Hard

Arrange the following in correct sequence to attain equilibrium under perfect competition.

(A) LRMC start rising.

(B) Both LRAC and LRMC fall.

(C) Both LRAC and LRMC rises.

(D) LRMC cuts LRAC from below.

(A), (B), (C), (D)

(A), (C), (B), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 3

Correct Answer

Explanation

Q4:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Match List-I with List-II

List–I	List–II
(A) A proportional increase in all inputs results in an increase in output by a smaller proportion	(I) Constant returns to scale
(B) A proportional increase in all inputs results in an increase in output by a larger proportion	(II) Law of variable proportions
(C) A proportional increase in all inputs results in an increase in output by the same proportion	(III) Decreasing Returns to Scale
(D) Factor proportions change as long as one factor is held constant and the other factors increases	(IV) Increasing Returns to Scale

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 4

Correct Answer

Explanation

Q5:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Match List-I with List-II

List–I	List–II
(A) Total variable cost	(I) TR – (TVC + TFC)
(B) Total Revenue	(II) TVCₙ – TVCₙ₋₁
(C) Profit	(III) Average variable cost × Quantity
(D) Marginal cost	(IV) Price × Quantity

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 4

Correct Answer

Explanation

Q6:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Which of the following statements are true with regard to the production?

(A) In the short run, at least one of the factors of production remains fixed.

(B) In the long run, all factors of production can be varied.

(C) A period can be defined as long run or short run simply by looking at whether all the inputs can be varied or not.

(D) In the long run, factors of production can be classified into fixed and variable

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

Correct Answer

Option 2

Correct Answer

Explanation

Q7:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

As long as average cost is falling

Marginal cost > Average cost

Marginal cost < Average cost

Marginal cost = Average cost

Marginal cost = Total cost

Correct Answer

Option 2

Correct Answer

Explanation

Q8:

2025: 14 May Shift 1

Micro

>

Production & Costs

Easy

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

In the long run marginal cost curve shape is ..........

'V'-shaped curve

Horizontal curve

'U'-shaped curve

Downword Sloping curve

Correct Answer

Option 3

Correct Answer

Explanation

Q9:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

When the average cost is rising, then.

Marginal cost = Total cost

Marginal cost = Average cost

Marginal cost < Average cost

Marginal cost > Average cost

Correct Answer

Option 4

Correct Answer

Explanation

Q10:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

At the final level of production, a typical firm observed.

Increasing returns to scale

Constant returns to scale

Decreasing returns to scale

Total production

Correct Answer

Option 3

Correct Answer

Explanation

Q11:

2025: 14 May Shift 1

Micro

>

Production & Costs

Medium

Comprehension:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Long curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

LRMC cuts the LRAC curve from below at the point where.

LRMC is at minimum

LRAC is at minimum

LRAC is at maximum

LRMC is at maximum

Correct Answer

Option 2

Correct Answer

Explanation

Q12:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

According to the law of variable proportions, the marginal product of an input initially rises and then after a certain level of employment, it starts falling. The MP curve therefore looks like:

'U' Shaped

Convex to Origin.

'L' Shaped.

Inverse 'U' Shaped.

Correct Answer

Option 4

Correct Answer

Explanation

Q13:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

In given production function $q = f(x_1, x_2)$ what is depicted by $f(tx_1, tx_2) < tf(x_1, x_2)$ .

Constant returns to scale.

Increasing returns to scale.

Decreasing returns to scale

Marginal returns to scale.

Correct Answer

Option 3

Correct Answer

Explanation

Q14:

2025: 13 May Shift 2

Micro

>

Production & Costs

Easy

Set of all possible combinations of the two inputs that yield the same maximum possible level of output is known as.........

Indifference Curve.

Production Possibility Curve.

Isoquant.

Budget Line.

Correct Answer

Option 3

Correct Answer

Explanation

Q15:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

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

Law of variable proportions.

Marginal rate of substitution.

Increasing cost.

Marginal productivity.

Correct Answer

Option 1

Correct Answer

Explanation

Q16:

2025: 13 May Shift 2

Micro

>

Production & Costs

Easy

Change in total cost per unit of change in output is defined as:

Short run marginal cost.

Average fixed cost.

Short run average cost.

Average variable cost.

Correct Answer

Option 1

Correct Answer

Explanation

Q17:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

In the short run, which of the following condition is mandatory for a firm for its profit maximization at q₀?

Price must be greater than the average cost

The price must be greater than the marginal cost.

Marginal cost must be deceasing at q₀.

Price must be greater than the average variable cost

Correct Answer

Option 4

Correct Answer

Explanation

Q18:

2025: 13 May Shift 2

Micro

>

Production & Costs

Easy

Comprehension:

Increasing return to scale (IRS) implies that if we increase all the inputs by a certain proportion, output increases by more than that proportion. In other words, to increase output by a certain 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 therefore also need to be increased by less than double. What is happening to the average cost here? It must be the case that as long as IRS operates, average cost falls as the firm increases output. Decreasing return to scale (DRS) implies that if we want to increase the output by a certain proportion, inputs need to be increased by more than that proportion. As a result, cost also increases by more than that proportion. So, as long as DRS operates, the average cost must be rising as the firm increases output. Constant return to scale (CRS) implies a proportional increase in inputs resulting in a proportional increase in output. So the average cost remains constant as long as CRS operates. It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Accordingly, the LRAC curve is a ‘U’-shaped curve. Its downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed.

In which of the following conditions, output increases with the same proportion of input?

Increasing return to sacle.

Decreasing return to scale.

Constant return to scale.

Diminishing marginal productivity.

Correct Answer

Option 3

Correct Answer

Explanation

Q19:

2025: 13 May Shift 2

Micro

>

Production & Costs

Easy

Comprehension:

Increasing return to scale (IRS) implies that if we increase all the inputs by a certain proportion, output increases by more than that proportion. In other words, to increase output by a certain 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 therefore also need to be increased by less than double. What is happening to the average cost here? It must be the case that as long as IRS operates, average cost falls as the firm increases output. Decreasing return to scale (DRS) implies that if we want to increase the output by a certain proportion, inputs need to be increased by more than that proportion. As a result, cost also increases by more than that proportion. So, as long as DRS operates, the average cost must be rising as the firm increases output. Constant return to scale (CRS) implies a proportional increase in inputs resulting in a proportional increase in output. So the average cost remains constant as long as CRS operates. It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Accordingly, the LRAC curve is a ‘U’-shaped curve. Its downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed.

When we have proportionately more output than input this economic concept is known as .........

Constant return to scale

Decreasing return to scale

Marginal rate of substitution.

Increasing return to scale

Correct Answer

Option 4

Correct Answer

Explanation

Q20:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

Comprehension:

Increasing return to scale (IRS) implies that if we increase all the inputs by a certain proportion, output increases by more than that proportion. In other words, to increase output by a certain 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 therefore also need to be increased by less than double. What is happening to the average cost here? It must be the case that as long as IRS operates, average cost falls as the firm increases output. Decreasing return to scale (DRS) implies that if we want to increase the output by a certain proportion, inputs need to be increased by more than that proportion. As a result, cost also increases by more than that proportion. So, as long as DRS operates, the average cost must be rising as the firm increases output. Constant return to scale (CRS) implies a proportional increase in inputs resulting in a proportional increase in output. So the average cost remains constant as long as CRS operates. It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Accordingly, the LRAC curve is a ‘U’-shaped curve. Its downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed.

In which condition, the average cost of a firm declines when output increases?

Marginal produvtivity.

Constant return to scale.

Decresing return to scale

Increasing return to scale.

Correct Answer

Option 4

Correct Answer

Explanation

Q21:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

Comprehension:

Increasing return to scale (IRS) implies that if we increase all the inputs by a certain proportion, output increases by more than that proportion. In other words, to increase output by a certain 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 therefore also need to be increased by less than double. What is happening to the average cost here? It must be the case that as long as IRS operates, average cost falls as the firm increases output. Decreasing return to scale (DRS) implies that if we want to increase the output by a certain proportion, inputs need to be increased by more than that proportion. As a result, cost also increases by more than that proportion. So, as long as DRS operates, the average cost must be rising as the firm increases output. Constant return to scale (CRS) implies a proportional increase in inputs resulting in a proportional increase in output. So the average cost remains constant as long as CRS operates. It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Accordingly, the LRAC curve is a ‘U’-shaped curve. Its downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed.

In a long run average cost curve which point is said to be the constant return to scale?

Upward Slope

Minimum Point.

Mid-point in upward slope.

Downward Slope.

Correct Answer

Option 2

Correct Answer

Explanation

Q22:

2025: 13 May Shift 2

Micro

>

Production & Costs

Medium

Comprehension:

Increasing return to scale (IRS) implies that if we increase all the inputs by a certain proportion, output increases by more than that proportion. In other words, to increase output by a certain 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 therefore also need to be increased by less than double. What is happening to the average cost here? It must be the case that as long as IRS operates, average cost falls as the firm increases output. Decreasing return to scale (DRS) implies that if we want to increase the output by a certain proportion, inputs need to be increased by more than that proportion. As a result, cost also increases by more than that proportion. So, as long as DRS operates, the average cost must be rising as the firm increases output. Constant return to scale (CRS) implies a proportional increase in inputs resulting in a proportional increase in output. So the average cost remains constant as long as CRS operates. It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. Accordingly, the LRAC curve is a ‘U’-shaped curve. Its downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed.

To increase the output by a certain proportion, if inputs need to be increased by more than that proportion, that condition lies in which of the following?

Increasing return to scale.

Decreasing return to scale.

Constant return to scale.

Proportinate return.

Correct Answer

Option 2

Correct Answer

Explanation

Q23:

2025: 13 May Shift 1

Micro

>

Production & Costs

Medium

Match List-I with List-II

List-I	List-II
(A) Relationship between the variable input and output.	(I) Average Product
(B) Output per unit of variable input.	(II) Marginal Product
(C) Change in output per unit of change in the input	(III) Law of variable proportions
(D) The marginal product of a factor input initially rises with its employment level	(IV) Total Product

Choose the correct answer from the options given below:

(A) - (IV), (B) - (I), (C) - (II), (D) - (III)

(A) - (I), (B) - (II), (C) - (II), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (II), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 1

Correct Answer

Explanation

Q24:

2025: 13 May Shift 1

Micro

>

Production & Costs

Easy

How does technological progress affect the firms' supply curve?

Shift to the right.

Shift to the left.

Remain at same place.

Shift in vertical shape.

Correct Answer

Option 1

Correct Answer

Explanation

Q25:

2025: 13 May Shift 1

Micro

>

Production & Costs

Easy

In the long run __________.

At least one of the factor varied.

All factors of production can be varied.

Factor remains fixed.

Only one factor can vary.

Correct Answer

Option 2

Correct Answer

Explanation

Q26:

2025: 13 May Shift 1

Micro

>

Production & Costs

Medium

The collection of all possible combinations of the goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called?

Production Possibility Frontier

Isoquant Curve

Production Possibility Set

Isocost Line

Correct Answer

Option 3

Correct Answer

Explanation

Q27:

2025: 13 May Shift 1

Micro

>

Production & Costs

Easy

Marginal cost curve intersects average cost curve at ..........

At maximum point of average cost curve.

At minimum point from of average cost curve.

Do not intersect.

Intersect at mid point at rising average cost curve.

Correct Answer

Option 2

Correct Answer

Explanation

Q28:

2025: 13 May Shift 1

Micro

>

Production & Costs

Easy

The point on the supply curve at which a firm earns only normal profit is called ...........

Break-even point.

Average Profit.

Long Run Average Cost.

Fixed Cost.

Correct Answer

Option 1

Correct Answer

Explanation

Q29:

2025: 13 May Shift 1

Micro

>

Production & Costs

Easy

________ of an input is defined as the change in output per unit of change in the input when all other inputs are remain constant.

Marginal Product.

Average Product.

Total Product.

Returns to Scale.

Correct Answer

Option 1

Correct Answer

Explanation

Q30:

2025: 13 May Shift 1

Micro

>

Production & Costs

Medium

Shape of Average Fixed Cost Curve is:

Constant

'U' Shaped.

Rectangular Hyperbola

Reverse Hyperbola

Correct Answer

Option 3

Correct Answer

Explanation

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