CBSE Class 12 Economics HOTs Production and Costs

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Question. The shape of the Total Physical Product short run is
1. Inverse U-Shaped
2. U-Shaped
3. Hyperbola
4. V-Shaped
Answer : Inverse U-Shaped

Question. What will be the marginal product when the total product is maximum?
Answer : Marginal Product will be zero when the total product is maximum.

Question. What do you mean by production?
Answer : Production is the method of producing or developing goods or services in large quantities with the help of various materials.

Question. When the returns to a factor decline the marginal and the total product also decline.
Answer : False, when returns to a factor decline only Marginal Physical Product declines.

Question. Why Average Fixed Cost curve never touches “x” axis though lies very close to the x-axis?
Answer : The Average Fixed Cost curve never touches “x” axis though lies very close to the x-axis because Total Fixed Cost can never be zero.

Question. When TVC is zero at zero levels of output, what happens to TFC or why TFC is not zero at zero level od output?
Answer : When TVC is zero at zero levels of output, what happens to TFC or why TFC is not zero at zero levels of output because the fixed cost is to be acquired even at zero levels of output.

Question. Define cost concept. What are the different types of cost?
Answer : The spending experienced on different inputs is known as the cost.
Types of cost
• Money Cost- Total money spent by a company for manufacturing goods.
• Explicit Cost & Implicit Cost- Payment made to an outsider are explicit and self-supplied are implicit cost.
• Real Cost- All hard work, discomforts, sacrifices involved in manufacturing a product is called real cost.
• Opportunity Cost- This the cost for the next best alternative foregone.
• Short Run Cost- Fixed cost- Fixed factors cost Variable Cost– Variable factor cost

Question. Why does average fixed cost fall with increase in output?
Answer : AFC can be calculated from TFC. Which remains constant at all level of output.

Question. Under which situation will MR fall when an additional quantity of a good is sold?
Answer : When per unit price falls by selling an additional unit of a good.

Question. Give one differences between law of supply and price elasticity of supply.
Answer : Law of supply reflects the direction of change in supply where as price elasticity of supply measures the magnitude of change in supply.

Question. Why does a producer moves downward along a supply curve due to decrease in price of commodity?
Answer : Because profit margin of firm (producer) decreases.

Question. When does the supply curve shift rightward while price remains constant.
Answer : When the supply of commodity increases due to change in other factors.

Question. How does the imposition of a tax affect the supply curve of a firm?
Answer : The supply curve will shift to the left side.