For a production firm, the pecuniary economies arise from which one of the following sources ?
Purchasing and market economies
Economies of scale are divided into real economies and pecuniary economies, and the distinction turns on whether the saving is in physical resources or merely in the prices paid.
Pecuniary economies arise from purchasing and market economies. They are monetary savings the firm enjoys because its size lets it obtain inputs on better terms - discounts for bulk purchase of raw materials, lower freight and advertising rates, cheaper finance because lenders view a large firm as a safer borrower, and better terms from suppliers generally. Note that nothing physical has improved: the firm uses the same quantity of inputs per unit of output, it simply pays less for them. That is precisely why these are called pecuniary, that is monetary, economies.
The other three are sources of real economies, where the firm actually uses fewer physical resources per unit. Large scale production allows greater specialisation and better use of capacity. Indivisibility of factor inputs means large machines and specialist staff can only be used efficiently at high output, so spreading them over more units lowers real cost. Learning economies arise as workers and managers become more skilled with repetition, raising physical productivity.
Hence pecuniary economies arise from purchasing and market economies.
Similar Questions
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:
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
Code :
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 :
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 ?
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 :
Statement (I): The elasticity of factor substitution is formally defined as the percentage change in the capital-labour ratio divided by the percentage change in the marginal rate of technical substitution.
Statement (II): \(Q = K^{0.5} L^{0.3}\) is a production function where Q = output, K = units of capital and L = units of labour. This production function shows the application of increasing returns to scale.
Codes:
Law of Diminishing Return applies when the gaps among the successive ‘multiple-level of output’ isoquants:
Important Questions from Production Function
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 :
Which of the following is not an attribute of production function?
- Match the stages of production with their corresponding characteristics :
(i) Stage-I (a) Total product declines, Marginal product is negative (ii) Stage-II (b) Total product increases at an increasing rate, marginal product positive (iii) Stage-III (c) Total product increases at a diminishing rate, marginal product is zero. - Neo-classical production function has which of the following characteristics ?
(a) Positive and diminishing marginal productivities of the factors
(b) Constant returns to scale
(c) Satisfies Inada conditions
Choose the correct answer from the code below :
