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 :
Both (A) and (R) are correct and (R) is correct explanation of (A)
Option 1 — Both (A) and (R) are correct and (R) is the correct explanation of (A) is correct.
An isoquant map shows combinations of two inputs (say labour and capital) that yield the same level of output. The ridge lines are the loci that join the points on successive isoquants where the marginal rate of technical substitution is zero or infinite — that is, where an isoquant becomes horizontal or vertical.
Between the two ridge lines lies the economic region of production, where both inputs have positive marginal products and the isoquants slope downward from left to right. Producing here is efficient because using more of one input allows you to use less of the other.
Beyond a ridge line, the assertion holds: the marginal product of the input being added turns negative. Adding more of that input actually reduces output, so to keep output constant the firm would have to add more of the other input as well. This forces the isoquant to bend back and slope positively — exactly what the reasoning states. Thus (R) explains precisely why the ridge lines mark the boundary of positive productivity, making it the correct explanation of (A).
Takeaway: ridge lines fence off the economically efficient region; outside them a factor's marginal product is negative and the isoquant slopes upward.
Similar Questions
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A. Specifying objectives
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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
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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) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{0}}\)
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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.
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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.
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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:
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(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
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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 ________.
