The Law of Diminishing Returns applies when the gaps among the successive 'multiple-level of output' isoquants:
increases
An isoquant map plots curves of equal output, usually drawn for equal increments of output (say 100, 200, 300 units). The spacing between successive isoquants tells us how much extra input is needed to produce each additional equal increment of output.
Under the Law of Diminishing Returns, as more of an input is added, each successive equal increment of output requires a larger and larger addition of input. Graphically, this means the successive equal-output isoquants lie farther and farther apart - the gaps between them increase - because ever-greater input is needed to move up to the next output level.
If the gaps decreased or stayed constant, that would signal increasing or constant returns respectively, since equal or smaller input additions would yield equal output increments. Irregular gaps would not describe a systematic law at all. Only widening gaps capture diminishing returns.
Hence the Law of Diminishing Returns applies when the gaps among the successive isoquants increase.
Similar Questions
When we measure what type of demand we assume that effects of other variables is constant?
Arrange the steps in demand forecasting from beginning to end
A. Specifying objectives
B. Making choice of methods
C. Determing the perspective
D. Estimation and interpretation of results
E. Collection of data and data adjustment
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Managerial economics is concerned with which combination of the following ?
(a) Investment Analysis and Decisions
(b) Production Behaviour and Cost Analysis
(c) Input Reward Analysis and Decisions
(d) Economic Environment Analysis
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In case the producer's equilibrium shifts to a higher isoquant due to decrease in price of an input, the curve combining the successive equilibrium positions is known as :
Which one of the following statements is not correct ?
When P0 and P1 and Q0 and Q1 denote before and after change in the price and quantity respectively and in both the situations, total outlay remains the same, which of the following formulae give the similar value of the arc price - elasticity of demand ?
(a) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}+P_{1}}{Q_{0}+Q_{1}}\)
(b) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{1}}\)
(c) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{0}}\)
(d) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{1}}\)
(e) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{0}}\)
Code :
For the following two statements of Assertion (A) and Reasoning (R), indicate the correct code :
Assertion (A) : Ridge Lines in isoquant map set the limits for the positive productivities of the respective inputs used in the production process.
Reasoning (R) : Isoquants will slope positively if the use of an input is increased beyond the limit set by the ridge lines.
Code :
If a 100% scale-efficient plant has 92% technical efficiency and 88.5% allocative-efficiency, then its overall efficiency will be :
Match the production functions List - I with the return to scale List - II.
List - I (Production function) List - II (Return to scale) (a) \( Q = 10\,K^{0.5}L^{0.4}E^{0.15}M^{0.1} \) (i) increasing (b) \( Q = 12\,K^{0.5}L^{0.5} \) (ii) constant (c) \( Q = 100\,K + 15\,L \) (iii) decreasing (d) \( Q = 40\,K^{0.3}L^{0.5} \) Code :
It costs a firm ₹ 90 per unit to produce product A, and ₹ 60 per unit to produce B individually. If the firm can produce both products together at ₹ 160 per unit of product A and B, this exhibits signs of:
Important Questions from Production Function
Match List I with List II
LIST I
(Production Cost)
LIST II
(Underlying Meaning)
A.
Implicit Costs
I.
Change in the total cost per unit change in output.
B.
Marginal cost
II
Total increase in costs resulting from the implementation of a particular managerial decision.
C.
Incremental Cost
III.
Inputed value of inputs owned and used by the firm.
D.
Sunk Cost
IV.
The costs that are not affected by managerial decision.
Choose the correct answer from the options given below:
For the following two statements of Assertion (A) and Reasoning (R) suggest the correct code:
Assertion (A): Low initial price regarded as the principal means for entering into mass market for some new products.
Reasoning (R): Firms generally enter into production of new products with excess capacity of the plant initially.
Code:
Indicate the correct code from the following types of the long run average cost curves on which the minimum average cost of production in long run can be determined:
(i) Long run average cost curve under normal production function
(ii) Long run average cost curve under linearly homogeneous production function
(iii) Planning curve
(iv) Envelope curve
Choose the correct answer from the code given below :
In which one of the following concepts, a buyer is passively involved in an exchange transaction, and he accepts whatever is offered to him by a marketer?
Lowering of costs that a firm often experiences when it produces two or more products together than each alone is known as ________.
