CA Foundation · Business Economics · Theory of Production and Cost
A production function is given as Q = 4L, where L is the number of labour units and capital is fixed. If a firm in Indore employs 12 units of labour, what are the total product and the average product of labour?
Total product is 48 units and average product is 4 units. Substituting L = 12 into Q = 4L gives 48, and dividing the total product by 12 workers gives an average product of 4 per unit of labour.
- ATP = 48, AP = 4Correct
- BTP = 48, AP = 12
- CTP = 16, AP = 4
- DTP = 3, AP = 0.25
Explanation
TP = 4 × 12 = 48 units. AP = TP/L = 48/12 = 4. Option 2 wrongly treats the labour count as AP; option 3 adds 4 and 12 instead of multiplying.
Did you get it right without looking?
One question tells you little. A timed set on Theory of Production and Cost shows your real accuracy, how long you take and where you lose marks.
More Theory of Production and Cost questions
- In the three stages of the Law of Variable Proportions, a rational producer will operate in Stage II because:
- A tailoring unit in Ludhiana adds workers to a fixed number of sewing machines. The total product (TP) for 1, 2, 3, 4 and 5 workers is 8, 20…
- In a short-run production function, the Law of Variable Proportions is said to operate. Which condition is essential for this law to hold?
- A firm's long-run total cost is ₹6,00,000 at 1,000 units and ₹9,00,000 at 2,000 units. Which conclusion is correct for this output range?
- A packaging unit in Rajkot uses 10 units of labour and 20 units of capital to produce 500 boxes. When it uses 30 units of labour and 60 unit…
- In the three stages of the Law of Variable Proportions, a rational producer will not operate in Stage I mainly because: