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Assignment 8 (Unit 4) on Long Run Production:

A) Multiple Choice Questions
1. The relation between production element and production is known as:
a. physical relationship c. cultural relationship
b. technological relationship d. both the a & b
2. The laws of returns imply:
a. law of increasing return c. law of constant return
b. law of diminishing return d. All of the above
3. Every combination on a specific ISO product cover represents:
a. unequal combination of c. different level of output
output
d. same level of output
b. zero output
4. Returns to scale is in operation when quantity of:
a) All inputs are changed.
b) All inputs are changed in already established proportion.
c) All inputs are not changed.
d) One input change while other inputs remain unchanged.
5. In a production process, the input combination has 30 per cent fixed assets, 40
per cent raw material and 10 per cent labour. The quantity of all other inputs
except fixed assets has doubled. The production process would be subjected to:
a. Law of increasing returns to scale
b. law of diminishing returns to scale
c. law of constant returns to scale
d. law of variable proportion
6. When Isoquant curve is convex to the origin, we observed marginal rate of
technical substitution of Labor for capital as:
a. Increasing c. Constant
b. Diminishing d. None
7. When Isoquant curve is concave to the origin, we observed marginal rate of
technical substitution of Labor for capital as:
a. Increasing c. Constant
b. Diminishing d. None
8. When Isoquant curve is downward linear, we observed marginal rate of technical
substitution of Labor for capital as:
a. Increasing c. Constant
b. Diminishing d. None
9. Prices of inputs are represented by:
a. isoquant b. iso cost
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c. indifference curve d. All

10. When wage rate decreases iso cost curve becomes:
a. Flatter c. Constant
b. Steeper d. None
11. when rate of interest increases iso cost curve becomes:
a. Flatter c. Constant
b. Steeper d. None
12. When budget of producer increases iso cost becomes:
a. Flatter c. shifts right ward.
b. shifts leftward. d. Steeper
13. When a substantial increase is made in the plant capacity of a firm, this is known as
(a) A short run adjustment (c) A temporary adjustment
(b) A long run adjustment (d) None of the above
14. When there was increase demand for its goods in the market a firm took a bank overdraft
bought raw materials with the amount and increased production, this is case of
(a) A short run adjustment (c) A financial adjustment
(b) A long run adjustment (d) None of the above
15. When output increases in a greater extent than increase in input, we get:

(a) Decreasing returns to scale (c) Constant returns to scale

(b) Increasing returns to scale (d) Law of diminishing marginal product
16. In which production function CRS is applicable?
(a) Q = 2k + 3L (c) Q = K 2 + L2
(b) Q = KL (d) All
17. Slope of Isoquant is:
MPL MPL
(a) (c) −
MPK MPK
w
(b) (d) Both (a) and (c)
r

18. Slope of cost line C = wL + r.K is :

MPL K
(a) − (c)
MPK L
w r
(b) − (d) −
r w
19. Least cost combination of input is also known as :
(a) Output maximisation (c) Product optimisation
(b) Cost minimisation (d) None

20. Output maximization is known as :

MPL w
(a) Product optimisation (c) =
MPK r
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(b) Producer’s equilibrium (d) All

B) Descriptive Questions
1. How do you distinguish between short term and long run production

2. How do you derive equal product curve show that isoquant is

negatively sloped

3. Which curve shows you prices of input? Derive this curve

diagrammatically and find out slope?

4. When the price of labour decreases what will be the effect on isocost
curve?

5. When price of capital decreases what will be the effect on isocost

curve?

6. Differentiate between change in slope of iso cost line and shift in iso
cost line.

7. Consider production function Q = F(K, L) & cost function C=wL+rK.

Find out maximization of output subject to the cost constraint, both
diagrammatically & economic interpretation.

8. Consider production function Q = F(K, L) & cost function C=wL+rK.

Find out minimization of cost subject to output constraint, both
diagrammatically & economic interpretation.

9. How do you find out the expansion path?

10. Show different returns to scale with the help of expansion

path.

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