Explain the concept of a production function
The production function of a firm depicts the relationship between the inputs used in the production process and the final output. It specifies how many units of different inputs are needed in order to produce the maximum possible output. Production function is written as:
Qx = f ( L,K )
Where, Qx represents units of output x produced.
L represents units of labour employed.
K represents units of capital employed.
The above equation explains that Qx units of output x are produced by employing L and K units of labour and capital respectively and by a given technology. As the given level of technology appreciates, the output will increase with the same level of capital and labour units.
What is the total product of input?
Let the production function of a firm be Q=5L1/2K1/2Q=5L1/2K1/2 Find out the maximum possible output that the firm can produce with 100 units of LL and 100 units of KK.
When does a production function satisfy decreasing returns to scale?
Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?
What do the long-run marginal cost and the average cost curves look like?
What does the average fixed cost curve look like? Why does it look so?
Explain the relationship between the marginal products and the total product of an input.
Why is the short-run marginal cost curve 'U'-shaped?
What is the law of variable proportions?
The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
Explain market equilibrium.
Discuss the central problems of an economy.
What are the characteristics of a perfectly competitive market?
What do you mean by the budget set of a consumer?
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
When do we say that there is an excess demand for a commodity in the market?
What do you mean by the production possibilities of an economy?
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
What is budget line?
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
What do you understand by positive economic analysis?
Can there be a positive level of output that a profit-maximising firm produces in a competitive market at which market price is not equal to marginal cost? Give an explanation.
Why is the total revenue curve of a price-taking firm an upward-sloping straight line? Why does the curve pass through the origin?
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
Discuss the central problems of an economy.
A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
Marginal Revenue |
100 |
90 |
80 |
70 |
60 |
50 |
40 |
30 |
20 |
10 |
Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs.1000, describe the equilibrium in the short run and in the long run.
A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exits is permitted. Explain.