Short Answer TypeDefine fixed cost. Give an example. Explain with reason the behaviour of Average Fixed Cost as output is increased.
Define marginal product. State the behaviour of marginal product when only one input is increased and other inputs are hold constant.
Marginal Product (MP) is defined as an additional output or net addition to the total output when an additional unit of the variable factor is employed keeping other factors remain constant.
MP = TPn - TPn-1
where
MPn -Marginal product of nth unit of labour
TPn -Total product produced with n units of labour
TPn-1 = Total product produced with (n - 1) unit of labour
When only one input is increased and other inputs are hold constant, the MP will be
| Units of Variable Factor | TP | MP | Change in the MP Curve |
| 0 | 0 | - | MP Curve increases at an increasing rate till 3rd unit |
| 1 | 4 | 4 | |
| 2 | 12 | 8 | |
| 3 | 24 | 12 | |
| 4 | 32 | 8 | MP curve continues to fall from 5th unit |
| 5 | 34 | 2 | |
| 6 | 30 | -4 | MP curve continues to fall and it becomes negative from 6th unit |
When price of a commodity falls from Rs 12 per unit to Rs 9 per unit, the producer supplies 75 percent less output. Calculate price elasticity of supply
Long Answer TypeWhy do central problems of an economy arise? Explain the central problem of 'for whom to produce'?
Examine the effect of (a) fall in the own price of good X and (b) rise in tax rate on good X, on the supply curve. Use diagrams.
Explain the implications of the following in a perfectly competitive market
(a) Large number of sellers
(b) Homogeneous products.
Explain the implications of the following in an oligopoly market:
(a) Barriers to entry of new firms
(b) A few or a few big sellers
Short Answer TypeNational income is the sum of factor incomes accruing to:(Choose the correct alternative):
(a) Nationals
(b) Economic territory
(c) Residents
(d) Both residents and non-residents
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