Q11 of 39 Page 1

(a) What is meant by increasing returns to a variable factor?

(b) Discuss briefly, any two reasons for the decreasing returns to a


variable factor.


a) In short, run, assuming that the other factors of production or constant, the proportionate change in the total product is greater than the proportionate change in the units of a variable factor. This is called the law of increasing returns to a variable factor.

b) The two reasons for the decreasing returns to a variable factor are :


a. Overutilization of the fixed factor: In the third stage of the production, the variable factor is much more as compared to the fixed factor. This leads to the overutilization of the fixed factor.


b. Negative marginal product: Throughout the third stage of production, the Total Product is falling. The additional product by the additional unit of labour becomes negative. The cost of employing labour is higher than its contribution to the total product.


More from this chapter

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9

Which of the following statements are true or false? Give valid reasons in support of your answer.

(a) Average cost curve cuts Average variable cost curve, at its minimum level.


(b) Average product curve and Marginal product curve are ‘U-shaped’ curves.


(c) Under all market conditions, Average revenue and marginal revenue are equal to each other.


(d) Total cost curve and Total variable cost curve are parallel to each other.


OR


Explain a firm’s equilibrium under perfect competition, using a hypothetical schedule.


 10

Explain the meaning of the following features of the Oligopoly Market :

(a) Non-Price Competition


(b) Few Sellers


 12

Explain the following Conditions ?

(a) Movement along the same indifference curve.


(b) The shift from a lower to a higher indifference curve.


OR


Explain the Law of Equi-Marginal Utility.


 13

Primary deficit in a government budget will be zero, when ___________ . (Choose the correct alternative)