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Production and cost — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsProduction and cost4 Marks
Question
State whether the following statements are true or false. Give reasons for your answer:
  1. When marginal revenue is constant and not equal to zero, then total revenue will also be constant.
  2. As soon as marginal cost starts rising, average variable cost also starts rising.
  3. Total product always increases whether there is increasing returns or diminishing returns to a factor.
✓

Answer

  1. False: When MR is constant and not equal to zero, it may be positive or negative TR increases when MR is positive and decreases when it is negative.
  2. False: AVC will rise only when MC>AVC whether MC is rising or falling.
  3. False: TP increases under Increasing Returns. It also increases under Diminishing returns till MP is positive. TP falls under Diminishing returns when MP is negative.

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