Returns to scale refer to the change in output when
A One factor is increased
B All factors are increased proportionately
C Price of output changes
D Cost of production changes
Returns to scale examine output response when all inputs are increased in the same proportion.
Increasing returns to scale are mainly due to
A External diseconomies
B Managerial inefficiency
C Economies of scale
D Fixed factor constraint
Large-scale production leads to technical and managerial economies, causing increasing returns.
Decreasing returns to scale generally occur due to
A Division of labour
B Specialisation
C Better coordination
D Management difficulties
Beyond a certain scale, managerial inefficiencies reduce productivity.
Constant returns to scale imply that
A Output increases more than inputs
B Output increases less than inputs
C Output increases in same proportion as inputs
D Output remains constant
Under constant returns, doubling inputs doubles output.
Which return to scale is most common in the long run initially?
A Decreasing
B Constant
C Increasing
D Negative
Firms initially enjoy increasing returns due to economies of scale.
When output increases less than proportionately to inputs, it is
A Increasing returns
B Constant returns
C Decreasing returns
D Negative returns
Less than proportionate increase in output indicates decreasing returns to scale.
Returns to scale differ from law of variable proportions because returns to scale apply to
A Short run
B Market period
C Long run
D Very short run
Returns to scale operate in the long run when all inputs vary.
Which factor does NOT cause increasing returns to scale?
A Specialisation
B Division of labour
C Improved technology
D Scarcity of fixed factor
Scarcity of fixed factor causes diminishing returns, not increasing returns.
Decreasing returns to scale are also known as
A Law of diminishing returns
B Law of variable proportions
C Diseconomies of scale
D External economies
Decreasing returns arise due to diseconomies of scale.
Which returns to scale arise due to managerial inefficiency?
A Increasing
B Constant
C Decreasing
D Perfect
Large-scale management problems reduce efficiency.
Returns to scale are represented graphically by
A Cost curves
B Isoquants
C Demand curves
D Supply curves
Isoquants show combinations of inputs yielding same output, useful for returns to scale analysis.
Increasing returns to scale are indicated when successive isoquants are
A Equally spaced
B Farther apart
C Closer together
D Vertical
Closer isoquants indicate more output with same input increase.
Constant returns to scale occur when isoquants are
A Converging
B Diverging
C Equidistant
D Vertical
Equal spacing shows proportional change in output.
Decreasing returns to scale occur when isoquants are
A Closer
B Equidistant
C Farther apart
D Horizontal
Greater input increase needed for same output rise indicates decreasing returns.
Which is an external economy of scale?
A Better supervision
B Improved management
C Growth of skilled labour market
D Division of labour
External economies arise from industry growth, not individual firm effort.
Which is an internal economy of scale?
A Transport development
B Technical specialization
C Industry research institute
D Government subsidy
Internal economies accrue to individual firms.
Producer’s equilibrium refers to a situation where producer
A Minimizes cost
B Maximizes profit
C Maximizes output
D Minimizes loss
Producer equilibrium is achieved when profit is maximized.
Profit is maximized when
A TR = TC
B TR > TC
C MR = MC
D AR = AC
Profit maximization condition is MR equals MC.
Under TR–TC approach, profit is maximum when
A TR is maximum
B TC is minimum
C Gap between TR and TC is maximum
D TR equals TC
Maximum vertical distance between TR and TC gives maximum profit.
Producer incurs loss when
A TR > TC
B TR = TC
C TR < TC
D MR = MC
Loss occurs when total cost exceeds total revenue.
Break-even point occurs when
A Profit is maximum
B Loss is minimum
C TR = TC
D MR > MC
At break-even point, producer earns normal profit.
Under perfect competition, MR is equal to
A AR
B Price
C Demand
D Both A and B
In perfect competition, AR = MR = Price.
Producer’s equilibrium under MC–MR approach requires
A MC = AC
B MR = AR
C MC = MR and MC cuts MR from below
D TR = TC
Second-order condition ensures stable equilibrium.
If MC is greater than MR, producer should
A Increase output
B Decrease output
C Maintain output
D Shut down
MC > MR means cost of extra unit exceeds revenue.
If MR is greater than MC, producer should
A Decrease output
B Maintain output
C Increase output
D Shut down
Extra output adds more to revenue than cost.
Normal profit is included in
A Explicit cost
B Implicit cost
C Fixed cost
D Total cost
Normal profit is part of total cost.
Shut-down point occurs when price equals
A ATC
B AVC
C AFC
D MC
Firm shuts down when price < AVC in short run.
Firm continues production in short run if
A Price > AVC
B Price < AVC
C Price = AFC
D MC > MR
As long as variable costs are covered, production continues.
In long run, firm earns
A Supernormal profit
B Loss
C Normal profit only
D Zero profit
Free entry and exit lead to normal profits in long run.
Producer’s equilibrium ensures
A Maximum cost
B Minimum revenue
C Maximum profit
D Zero output
Equilibrium point gives highest possible profit.
Which curve shows minimum acceptable price for producer?
A Demand curve
B MC curve
C Supply curve
D MR curve
Supply curve reflects minimum price producer accepts.
Under monopoly, MR curve is
A Same as demand
B Above demand
C Below demand
D Horizontal
Monopoly faces downward sloping demand, MR lies below it.
In perfect competition, firm is price taker because
A Few buyers
B Many sellers
C Product differentiation
D Government control
Large number of sellers prevents price control by any one firm.
If MC cuts MR from above, equilibrium is
A Stable
B Unstable
C Indeterminate
D Maximum loss
Correct equilibrium requires MC to cut MR from below.
Profit per unit equals
A AR – AC
B MR – MC
C TR – TC
D AC – AR
Difference between price received and average cost gives profit per unit.
Supernormal profit exists when
A AR = AC
B AR < AC
C AR > AC
D MR = MC
When price exceeds average cost, firm earns supernormal profit.
Loss occurs when
A AR > AC
B AR = AC
C AR < AC
D MR = MC
Average cost exceeds average revenue.
Producer equilibrium can be determined using
A Utility curves
B Indifference curves
C Cost and revenue curves
D Demand curves only
Profit maximization uses cost and revenue analysis.
Which condition ensures profit maximization?
A MR > MC
B MR < MC
C MR = MC
D AR = AC
Equality of marginal cost and marginal revenue is necessary condition.
TR curve is maximum when
A MR = 0
B MR = MC
C AR = AC
D TC = TR
TR is maximized where MR equals zero.
Under TR–TC approach, profit is shown by
A Horizontal distance
B Vertical distance
C Slope
D Area
Vertical gap between TR and TC shows profit or loss.
Long-run equilibrium of firm implies
A Loss
B Supernormal profit
C Normal profit
D Zero output
Competitive pressures eliminate abnormal profits.
Which cost curve helps in supply decision?
A AFC
B AVC
C AC
D MC
MC guides output decision at margin.
Supply curve of firm in short run is
A MC below AVC
B MC above AVC
C AC curve
D TC curve
Firm supplies where price ≥ AVC.
Producer equilibrium under monopoly differs because
A MR ≠ AR
B MR = AR
C MC = AC
D Demand is elastic
Monopoly faces downward sloping demand, so MR < AR.
Producer’s equilibrium is a
A Consumer concept
B Welfare concept
C Profit concept
D Cost concept
It focuses on profit maximization.
Firm shuts down in long run if
A Price < AVC
B Price < ATC
C Price = MC
D MR = MC
In long run, firm must cover all costs.
Which approach is graphical in nature?
A Algebraic
B TR–TC
C Accounting
D Statistical
TR and TC curves are shown graphically.
The point where MR intersects MC gives
A Minimum cost
B Maximum revenue
C Profit maximizing output
D Break-even output
Intersection determines optimal output.
Producer equilibrium ensures efficient allocation of
A Income
B Resources
C Demand
D Utility
Profit maximization leads to efficient resource use. ; mark question from 1 to 50