When does a production function satisfy increasing returns to scale?
Increasing returns to scale (IRS) holds when a proportional increase in all the factors of production leads to an increase in the output by more than the proportion. For example, if both the labour and the capital are increased by ‘n’ times, and the resultant increase in the output is more than ‘n’ times, then we say that the production function exhibits IRS.
Algebraically, IRS exists when,
F (nL, nK) > n. f (L, K)
Popular Questions of Class 12 Micro Economics
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What is the supply curve of a firm in the long run?
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The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.
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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?
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Distinguish between a centrally planned economy and a market economy.
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How does the imposition of a unit tax affect the supply curve of a firm?
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A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4. - Q:-
What is the relation between market price and average revenue of a price-taking firm?
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What is budget line?
- Q:-
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.
- Q:-
Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
Recently Viewed Questions of Class 12 Micro Economics
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When does a production function satisfy decreasing returns to scale?
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When does a production function satisfy constant returns to scale?
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Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?
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What do you mean by the production possibilities of an economy?
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What is the total product of input?
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What are the average fixed cost, average variable cost and average cost of a firm? How are they related?
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Suppose the demand and supply curves of salt are given by:
(a) Find the equilibrium price and quantity.
(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p
How does the equilibrium price and quantity change? Does the change conform to your expectation?
(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?
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Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?
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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.
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When do we say that there is an excess demand for a commodity in the market?
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