ECONOMICS ASSIGNMENT

PRODUCTION AND COST

1. What is marginal product of input?
2. How income of producer (entrepreneur) is different from the incomes of other factors of
production.
3. Can average product be zero or negative? Why?
4. What does point of inflexion on Total Product curve indicate?
5. What is implicit cost? Give two examples.
6. Why does the gap between ATC and AVC curves decrease with increase in the level of output?
7. Define normal profit?
8. Giving reasons state whether following statements are true or false.
(a) TP increases only when AP increases.
(b) If MP falls, AP must also fall.
(c) If MP rises, AP must also rise.
(d) When there are diminishing returns to a factor, TP always decreases.
9. What are the three phases of short run production function? Why does it not make any
economic sense to produce in phase I?
10. Why MP curve intersects AP curve at its maximum point?
11. Do ATC and AVC curve intersect each other? Give reason.
12. Explain the relation between TC and MC?
13. Explain the behaviour of TC curve as output increases.
14. Complete the table:
UNITS AVC TC MC
1 ___________ 60 20
2 18 ___________ __________
3 ___________ ___________ 18
4 20 120 __________
5 22 ___________ __________

15. Complete the table:
UNITS AFC MC TC
1 ___________ ____________ ____________
2 ___________ 10 82
3 20 8 _____________
4 ___________ ____________ 99
5 12 10 ____________

16. Identify the times phases of the Law of Variable Proportion from the following schedule. Give
reasons for your answer.
UNITS OF VARIABLE INPUT TOTAL PRODUCT
1 50
2 55
3 50
4 45
5 36
6 26