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CA Foundation Theory of Production — practice questions — page 2

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 31–55 of 55.

Why do very large firms often face decreasing returns to scale?Read the answer and worked solution →What drives increasing returns to scale as a firm expands?Read the answer and worked solution →Across output levels, a typical firm shows which order of returns to scale?Read the answer and worked solution →If all inputs double and output rises to less than double, returns to scale are what?Read the answer and worked solution →Under constant returns to scale, long-run average cost is what, given constant factor costs?Read the answer and worked solution →Under increasing returns to scale, long-run average cost does what?Read the answer and worked solution →In mainstream microeconomics, returns to scale are mainly set by what?Read the answer and worked solution →How can a firm change its scale of production in the long run?Read the answer and worked solution →An isoquant is also known as which curve?Read the answer and worked solution →Every point on an isoquant shows what?Read the answer and worked solution →Isoquants are what, mathematically, of the production function?Read the answer and worked solution →Unlike an indifference curve, an isoquant measures output in what?Read the answer and worked solution →Which curve deals with the producer's cost minimisation problem?Read the answer and worked solution →The slope of an isoquant equals which measure?Read the answer and worked solution →The steeper an isoquant, the higher is which value?Read the answer and worked solution →What is true of two different isoquants?Read the answer and worked solution →An input mix above and to the right of an isoquant gives what output?Read the answer and worked solution →If two inputs are perfect substitutes, how does X replace Y?Read the answer and worked solution →With perfect complements, inputs can be combined efficiently only how?Read the answer and worked solution →The cost-minimising input mix is at tangency of isoquant and which line?Read the answer and worked solution →At least cost, the ratio of marginal products equals which ratio?Read the answer and worked solution →A line joining tangency points of isoquants and isocosts is called what?Read the answer and worked solution →Under declining MRTS, an isoquant is what relative to the origin?Read the answer and worked solution →Widening gaps between isoquants of equal output steps indicate what?Read the answer and worked solution →With fixed unit input costs, isocost curves have which shape?Read the answer and worked solution →

Worked practice questions

Why do very large firms often face decreasing returns to scale?

  1. Cheaper raw materials
  2. Better technology use
  3. Greater specialisation
  4. Weak management control
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Correct answer: D. Weak management control

Larger scale makes management harder and coordination weaker across stages, lowering efficiency.

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What drives increasing returns to scale as a firm expands?

  1. Greater efficiency
  2. Weaker coordination
  3. Higher input taxes
  4. Smaller plant sizes
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Correct answer: A. Greater efficiency

Expanding the scale lets a firm raise efficiency, so output grows faster than inputs.

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Across output levels, a typical firm shows which order of returns to scale?

  1. Decreasing then increasing
  2. Constant, then decreasing
  3. Increasing, constant, decreasing
  4. Decreasing, then constant
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Correct answer: C. Increasing, constant, decreasing

Low output typically gives increasing returns, high output gives decreasing returns, with constant returns between.

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