Match the items of List - I with those of the List - II and indicate the correct code : Codes : (a) (b) (c) (d)List - I List - II (a) Excess capacity of the plant (i) Cost reduction with output expansion (b) Resorting to New Technology (ii) Constant cost with output expansion (c) Setting up of the Training Institutions (iii) Internal economies (d) Reserve capacity of the plant (iv) External economies
(i) (iii) (iv) (ii)
(a) Excess capacity of the plant means the plant is producing below its optimum. Expanding output spreads fixed costs over more units, so average cost falls: cost reduction with output expansion, (a)–(i).
(b) Resorting to new technology is a decision within the firm that improves productivity and lowers unit costs as the firm grows; such technical economies are internal economies, (b)–(iii).
(c) Setting up training institutions in a region creates a pool of skilled labour that benefits every firm in the industry, not just one. Such benefits arising from the growth of the industry are external economies, (c)–(iv).
(d) Reserve capacity is capacity deliberately built in to meet fluctuations in demand. In modern cost theory, it gives the average variable cost curve a flat stretch, so output can be expanded over a range at constant cost, (d)–(ii).
The matching (a)–(i), (b)–(iii), (c)–(iv), (d)–(ii) gives the code below.
Hence, (i) (iii) (iv) (ii).
Similar Questions
Match the items of the List – I with those of List – II and suggest the correct code :
List – I List – II a. Constant average cost over a range of output i. Economic capacity b. Average cost becomes constant momentarily ii. Reserve capacity c. Normal average cost is a U-shaped curve iii. Production and Managerials costs effects d. Modern Long-run average cost is L-shaped iv. Economies and Diseconomies Codes :
a b c d
Important Questions from Short-run and long-run cost curves
- L shaped average cost curve is witnessed in the large firms because
- The minimum Long Run Average Cost (LAC) can be determined on a
I. LAC curve for a normal production function
II. LAC curve for a linear production function
III. Planning curve
IV. Envelope curve
Codes: A multiproduct firm compares temporary shutdown with its best feasible operating product mix. Assume no shutdown/restart cost and unchanged unavoidable costs. Which pair of totals is sufficient for this comparison?
A. Past sunk investment
B. Last year’s revenue
C. Total revenue from the proposed operating mix
D. Total operating costs that would be avoided by shutting downMatch the items of the List – I with those of List – II and suggest the correct code :
List – I List – II a. Constant average cost over a range of output i. Economic capacity b. Average cost becomes constant momentarily ii. Reserve capacity c. Normal average cost is a U-shaped curve iii. Production and Managerials costs effects d. Modern Long-run average cost is L-shaped iv. Economies and Diseconomies Codes :
a b c d
