Theory of Production (IEcoS (Economic Services) Economics Paper-1): Questions 1 - 6 of 19

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Question number: 1

» Theory of Production » Factors of Production and Production Function

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Appeared in Year: 2011

Essay Question▾

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Given that the average revenue curve is a rectangular hyperbola, what will be the shape of the marginal revenue curve?

Explanation

  • When the Average Revenue Curve is a Rectangular Hyperbola, it means the Total Revenue of the Monopolist will remain constant for whatever price he may fix. Mathematically, the area under a rectangular hyperbola remains the same.
  • In the given diagram, the product of PQ and P1Q1 is thus the same. When total revenue is fixed, marginal revenue is z

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Question number: 2

» Theory of Production » Laws of Return, Returns to Scale and Return to Factors of Production

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Appeared in Year: 2011

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Consider a linear demand function where q = quantity demanded, p. = price per unit and . Find out the average and the marginal revenue and draw the diagram.

Question number: 3

» Theory of Production » Forms of Production Functions

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Appeared in Year: 2011

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Consider a Cobb Douglas production function where K and L are respectively the capital and labour to produce output y. show that if all the factors are paid according to their marginal products, the total product will be enhausted if

Question number: 4

» Theory of Production » Equilibrium of the Firm and Industry

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Appeared in Year: 2011

Essay Question▾

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If and are the demand and supply functions respectively, calculate the equilibrium price and the quantity. Hence calculate both consumers and producer’s surplus under equilibrium.

Explanation

  • The equilibrium is established at the point where demand is equal to supply. Thus, equating the demand and supply equations given, we get:

  • Putting this in any one of the equations give wi

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Question number: 5

» Theory of Production » Duality and Cost Function, Measures of Productive Efficiency of Firms

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Appeared in Year: 2011

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Establish mathematically the relationship between average cost (AC) and marginal cost (MC).

Question number: 6

» Theory of Production » Equilibrium of the Firm and Industry

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Appeared in Year: 2013

Essay Question▾

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Why does a perfectly competitive firm keep on producing in the short run when it is incurring losses?

Explanation

  • Explain also when the firm will shut down. Use suitable diagram.

  • In a perfectly competitive market, a firm is a price taker, that is, it can sell any amount of output at the prevailing market price. The equilibrium conditions are that MC = MR = Price and slope of MC should be greater than slope of MR. But the level of profits depends on the A

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