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CA Foundation Theory of Production — practice questions

Explore 55 free Theory of Production questions in CA Foundation Business Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Theory of Production questions and exercises with answers

Showing questions 1–30 of 55.

A production function links which two sets of quantities?Read the answer and worked solution →A production function is assumed to specify what for given inputs?Read the answer and worked solution →Classically, which trio were the primary factors of production?Read the answer and worked solution →In Stage 1 of production, the average physical product reaches its maximum where?Read the answer and worked solution →Why will a price-taking firm never stop in Stage 1?Read the answer and worked solution →In which stage is the variable input over-utilised relative to fixed inputs?Read the answer and worked solution →At the boundary of Stage 2 and Stage 3, what is achieved from the fixed input?Read the answer and worked solution →The optimum combination for a price-taking firm lies in which stage?Read the answer and worked solution →By adjusting inputs fixed in the short run, a firm in the long run can change what?Read the answer and worked solution →If a firm cuts its fixed capital inputs, its production function will do what?Read the answer and worked solution →Aggregate production functions in macroeconomics help to separate growth caused by what?Read the answer and worked solution →A production function describes which kind of boundary for output?Read the answer and worked solution →Neoclassical theory attributes factor income to which concept?Read the answer and worked solution →The law of diminishing returns says a further unit of one input eventually yields what?Read the answer and worked solution →Diminishing returns apply while which Latin condition holds for other factors?Read the answer and worked solution →Which set lists the four factors of production?Read the answer and worked solution →In 1815, early economists applied diminishing returns to which subject?Read the answer and worked solution →In which industry did the law of diminishing returns mainly originate?Read the answer and worked solution →Classical economists like Malthus blamed diminishing output on what?Read the answer and worked solution →A factory adds staff and output rises by the same percentage as staff. What is this?Read the answer and worked solution →Staff rises 2 percent in a crowded factory and output rises less than 2 percent. What is this?Read the answer and worked solution →When an extra worker actually reduces total output, returns are called what?Read the answer and worked solution →Going from one worker to two more than doubles output. This shows what?Read the answer and worked solution →How do returns of inputs relate to the cost of production?Read the answer and worked solution →What explains the bowed-out shape of the production possibilities frontier?Read the answer and worked solution →Returns to scale analysis belongs to which time frame?Read the answer and worked solution →In the long run, which factors of production are variable?Read the answer and worked solution →Inputs rise by 100 percent and output also rises by 100 percent. What is this?Read the answer and worked solution →Decreasing returns to scale mean output rises by what, relative to inputs?Read the answer and worked solution →Which situation describes increasing returns to scale?Read the answer and worked solution →

Worked practice questions

A production function links which two sets of quantities?

  1. Wages and profits paid
  2. Prices and incomes received
  3. Costs and revenue earned
  4. Physical inputs and output
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Correct answer: D. Physical inputs and output

It is the technological relation between quantities of inputs used and the quantity of goods produced.

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A production function is assumed to specify what for given inputs?

  1. Minimum possible output
  2. Average market price
  3. Maximum possible output
  4. Total fixed cost
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Correct answer: C. Maximum possible output

To qualify as a mathematical function, it is taken to give the maximum output the inputs can yield, forming a frontier.

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Classically, which trio were the primary factors of production?

  1. Money, goods and trade
  2. Skill, time and credit
  3. Rent, wages and interest
  4. Land, labour and capital
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Correct answer: D. Land, labour and capital

Classical economics named land, labour and capital as the primary factors that feed production.

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More Business Economics topics

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